Tesla Motors Inc (TSLA) SEC Filing 10-K Annual report for the fiscal year ending Tuesday, December 31, 2013

Exhibit 99.1

		Tesla Motors, Inc. – Fourth Quarter & Full Year 2013 Shareholder Letter   •    Record 6,892 Model S vehicles sold and delivered in Q4   •    World’s highest Consumer Reports customer satisfaction score of 99/100   •    Q4 auto gross margin of 25% with no zero emission vehicle (ZEV) credit revenue   •    Supercharger network built across most of USA and Northwest Europe   •    Net income of $46M and $0.33 EPS (non-GAAP), loss of $16M and $(0.13) EPS (GAAP) in Q4   •    Positive free cash flow of $40M in Q4   •    Expecting over 55% vehicle delivery growth in 2014 and 28% auto GM by Q4

February 19, 2014

Dear Fellow Shareholders:

Last quarter, we had record deliveries of 6,892 vehicles and exceeded our target automotive gross margin of 25%, achieving 25.2% on a non-GAAP basis and 25.8% on a GAAP basis. This capped a year in which we delivered 22,477 vehicles, resulting in almost $2.5 billion in sales on a non-GAAP basis and over $2 billion in sales on a GAAP basis. It is important to note that the differences between GAAP and non-GAAP are primarily due to lease accounting for our resale value guarantee (RVG) and employee stock based compensation as a result of the increase in our stock price last year. With 20 months since delivery of the first vehicles to customers, Model S continues to track to an outstanding residual value, with very few cars available for resale. If current trends continue, the average price of a used Model S should be meaningfully above our resale value guarantee.

For the year, Model S was the top selling vehicle in North America among comparably priced cars. Nonetheless, we believe there is room to improve in 2014 as we complete the Supercharger network and enable vehicle service almost anywhere in North America. The potential in Europe and Asia is even more significant. Towards the end of the year, we expect sales in those regions combined to be almost twice that of North America.

As volume increases, additional economies of scale will come into play, resulting in further improvements in gross margin. We think an automotive gross margin of 28%, excluding potential ZEV credit sales, is a reasonable target for Q4 2014, even if a lower option take rate is assumed. Please note that Tesla is not trying to achieve the absolute highest possible gross margin, as this would require following the industry practice of charging excessive prices to customers in certain markets, which we believe is inconsistent with building long term loyalty.

Enhancing the Customer Experience