Table of ContentsWe are focused on growing our manufacturing capacity, which includes capacity for manufacturing newer vehiclemodels such as our Cybertruck, Tesla Semi and future vehicles utilizing aspects of our next generation platform, and rampingthe production at our Gigafactories to their installed production capacities as well as increasing production rate and efficiencyat our current factories. The next phase of production growth will depend on the continued ramp at our factories and be initiatedby advances in autonomy and the introduction of new products, including those built on our next generation vehicle platform,as well as our ability to add to our available sources of battery cell supply by manufacturing our own cells that we aredeveloping to have high-volume output, lower capital and production costs and longer range. Our goals are to improve vehicleperformance, decrease production costs and increase affordability and customer awareness.These plans are subject to uncertainties inherent in establishing and ramping manufacturing operations, which may beexacerbated by new product and manufacturing technologies we introduce, the number of concurrent international projects, anyindustry-wide component constraints, labor shortages and any future impact from events outside of our control. For example,during the first quarter of 2024, we experienced a sequential decline in production volumes partially caused by the early phaseof the production ramp of the updated Model 3 at our Fremont factory, and factory shutdowns at Gigafactory Berlin-Brandenburg resulting from shipping diversions caused by the Red Sea conflict and an arson attack. Moreover, we have setambitious technological targets with our plans for battery cells as well as for iterative manufacturing and design improvementsfor our vehicles with each new factory.Automotive—Demand, Sales, Deliveries and InfrastructureOur cost reduction efforts, cost innovation strategies, and additional localized procurement and manufacturing are key toour vehicles’ affordability and have allowed us to competitively price our vehicles. We will also continue to generate demandby improving our vehicles’ performance and functionality, including through product offerings and features based on artificialintelligence such as Autopilot, FSD (Supervised), and other software, and delivering new vehicles and vehicle options. Inaddition, we have been increasing awareness, and expanding our vehicle financing programs, including attractive leasing termsfor our customers. Moreover, we expect to continue to benefit from ongoing electrification of the automotive sector andincreasing environmental regulations and initiatives.However, we operate in a cyclical industry that is sensitive to shifting consumer trends, political and regulatoryuncertainty, including with respect to trade and the environment, all of which can be compounded by inflationary pressures,rising energy prices, interest rate fluctuations and the liquidity of enterprise customers. For example, as inflationary pressuresincreased across the markets in which we operate, central banks in developed countries raised interest rates rapidly andsubstantially, which impacted the affordability of vehicle lease and finance arrangements. Further, sales of vehicles in theautomotive industry also tend to be cyclical in many markets, which may expose us to increased volatility as we expand andadjust our operations. Moreover, as additional competitors enter the marketplace and help bring the world closer to sustainabletransportation, we will have to adjust and continue to execute well to maintain our momentum. Additionally, our suppliers’liquidity and allocation plans may be affected by current challenges in the North American automotive industry, which couldreduce our access to components or result in unfavorable changes to cost. These macroeconomic and industry trends have had,and will likely continue to have, an impact on the pricing of, and order