Devonshire Research Group, LLC

Tesla Motors, Inc.

March 2016
-Attorney Confidential-

Disclaimer

As of the publication date of this report, the Principals and Clients of Devonshire Research Group LLC ("Devonshire") have a short position in the stock of the company covered
herein (Company) and stand to realize gains in the event that the price of the stock declines. Following publication of the report, Devonshires Principals and Clients may
transact in the securities of the company covered herein, including but not limited to the use of derivatives to hedge, synthetically replicate, or profit from near term volatility in its
position. All content in this report represent the opinions of Devonshire and is based on information that Devonshire believes to be reliable and the vast majority of which comes
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and specifically disclaims all warranties, express, implied, or statutory, regarding the accuracy, timeliness, or completeness of any material contained. All expressions of opinion are
subject to change without notice, and Devonshire undertakes no obligation to correct, update or revise those statements or to otherwise provide any additional materials.

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warranted as to completeness or accuracy and are subject to change without notice. The information included in this document is based upon selected public market data and
reflects prevailing conditions and Devonshires opinions as of this date, all of which are accordingly subject to change. Devonshires opinions and estimates constitute a best efforts
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investment strategy for an investor.

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develop a stand-alone judgment of the relevant markets prior to making any investment decision.

2
-Attorney Confidential-

Notice of investment interests

As of the publication date of this report, the Principals and Clients of Devonshire
Research Group LLC have a net short position in the stock, put options, bonds, and
credit swaps of Tesla Motors, Inc. and stand to realize gains in the event that the price of
the stock TSLA declines over the long run, or if investment sentiment improves the
appeal of an expected decline in any of its securities.

However, Devonshire recognizes that while the technology strategy of the Company
reflects a long term bearish outlook for Tesla Motors, Inc.s security instruments, the
short term implication of powerful marketing, including the power of social media
tweeting by the CEO and his PR firm, well orchestrated and heavily blogged product
launches, and a deep and powerful short term media control and attention span, suggests
unpredictable short term volatility.

Principals and Clients of Devonshire Research Group LLC are short term volatility
oriented with a long term net short position across multiple security instruments.

3
-Attorney Confidential-

On humility:

It is unwise to be too sure of ones own wisdom. It

is healthy to be reminded that the strongest might
weaken and the wisest might err.

-Gandhi

4
-Attorney Confidential-

Executive Summary
What kind of company is TSLA really? Few companies have ever managed such a broad scope of business models. Its
valuation multiples (when they can be calculated) lie well above its direct business model comparables
TSLA is attempting more vertical integration than any auto company has recently tried
TSLA trades at a higher revenue multiple than any related technology business
TSLAs only comparables in terms of multiple are business models that TSLA is not:
Software companies: TSLA has low / negative margins and heavy fixed asset commitment
Social media companies: TSLA has no network effects, no platform economics and high scaling costs
Biotech or oil explorations companies: TSLA has high marginal costs for every unit it produces

TSLA has relied heavily on existing technology in designing a successful EV model, and while it may have generated some
valuable IP it now controls little of it and has questionable sustainable competitive advantage in technology
TSLAs patents cover battery-related technology and selected components but not battery cells
TSLAs patent holdings are dwarfed by its technology competitors, limiting its freedom to operate in the EV market
where its technology position is modest
TSLAs engineering talent is thin relative to competitors and many productive inventors have left
TSLAs valuable inventions can be readily copied by its EV competitors
TSLAs cost position is heavily dependent on its bargaining positions with strategic suppliers who have an incentive to
price aggressively for their advanced technologies

TSLA is not the green company it claims to be, with environmental risks at all stages of the vehicle lifecycle
TSLA battery production requires the mining and use of numerous toxic chemicals
TSLA EV production has a heavier carbon footprint than traditional vehicles
TSLA vehicles consume lots of energy; battery charging shifts CO2 emissions from car engines to power plants
Disposal of TSLA batteries at large scale will create a heavy toxic burden

5
-Attorney Confidential-

Executive Summary
What kind of company is TSLA really? Few companies have ever managed such a broad scope of business models. Its
valuation multiples (when they can be calculated) lie well above its direct business model comparables
TSLA is attempting more vertical integration than any auto company has recently tried
TSLA trades at a higher revenue multiple than any related technology business
TSLAs only comparables in terms of multiple are business models that TSLA is not:
Software companies: TSLA has low / negative margins and heavy fixed asset commitment
Social media companies: TSLA has no network effects, no platform economics and high scaling costs
Biotech or oil explorations companies: TSLA has high marginal costs for every unit it produces

TSLA has relied heavily on existing technology in designing a successful EV model, and while it may have generated some
valuable IP it now controls little of it and has questionable sustainable competitive advantage in technology
TSLAs patents cover battery-related technology and selected components but not battery cells
TSLAs patent holdings are dwarfed by its technology competitors, limiting its freedom to operate in the EV market
where its technology position is modest
TSLAs engineering talent is thin relative to competitors and many productive inventors have left
TSLAs valuable inventions can be readily copied by its EV competitors
TSLAs cost position is heavily dependent on its bargaining positions with strategic suppliers who have an incentive to
price aggressively for their advanced technologies

TSLA is not the green company it claims to be, with environmental risks at all stages of the vehicle lifecycle
TSLA battery production requires the mining and use of numerous toxic chemicals
TSLA EV production has a heavier carbon footprint than traditional vehicles
TSLA vehicles consume lots of energy; battery charging shifts CO2 emissions from car engines to power plants
Disposal of TSLA batteries at large scale will create a heavy toxic burden

6
-Attorney Confidential-

Tesla wears many hatsdoes this large scope of functions justify its
disruptive reputation and corresponding market cap?
Business Function SIC / NAIC Code Nature of TSLA Involvement Example Comps

Automotive
1 3711 / 336111 Models S and X in production GM, Ford, Honda, VW
Automotive Manufacturer / Designer
Design /
Manufacture Assembly plant in Fremont, CA; network
2 Systems Integrator 7373 / 541512 Apple, IBM, Fujitsu
of suppliers, retail stores, charging stations

Software 3 Software Company 7372 / 511210 Autopilot, over-the-air updates, GUI Symantec, Microsoft, Oracle

Consumer Electronic
4 3571 / 334111 Control & sensor electronics LG, Toshiba, Sony, HP
Device Maker
Automotive
Components
Electric Motor /
5 3714 / 336390 EV powertrain design & manufacture Magna, Denso, Delphi
Powertrain Provider

6 Automotive Dealer 5511 / 441110 Direct-to-consumer vehicle sales Sonic, Penske, CarMax

Sales & Battery / Energy

7 3691 / 335911 Powerwall home battery, Gigafactory A123, Panasonic, LG Chem
Service Storage Provider

8 Electric Utility 4931 / 2211 Charging stations, battery swapping Entergy, Edison, Ameren

7
-Attorney Confidential-

Tesla is currently trading at a 7.0x revenue multiplefar above any

comparable except, at the extreme, a high-flying software company
Key financials across TSLA comps (EV in billion USD)
1 2 3 4
Automotive Consumer
Systems Integrator Software Company
Manufacturer / Designer Electronic Device Maker
Name EV/Rev EV P/E Name EV/Rev EV P/E Name EV/Rev EV P/E Name EV/Rev EV P/E
GM 0.6 91 6 Fujitsu 0.4 15 8 Symantec 1.7 11 16 HP 0.2 22 7
Honda 0.7 99 9 Hitachi 0.7 63 10 Microsoft 4.0 351 18 Sharp 0.3 7 NM
VW 0.7 159 7 Cisco 2.0 100 12 Oracle 4.0 150 14 LG 0.3 15 16
Nissan 1.0 106 8 IBM 2.0 165 10 SAP 4.3 98 17 Toshiba 0.4 22 NM
Daimler 1.0 173 8 Rockwell 2.2 13 18 Intuit 5.9 26 27 Sony 0.5 37 18
Continental 1.1 47 13 Apple 2.5 585 11 Salesforce 7.1 48 69 Samsung 0.7 118 9
Ford 1.1 162 7 Citrix 3.6 12 16 Adobe 8.4 40 31 Canon 0.8 28 16
Average 0.9 119 8 Average 1.9 136 12 Average 5.1 103 27 Average 0.5 36 13
Tesla 7.0 29 NM Tesla 7.0 29 NM Tesla 7.0 29 NM Tesla 7.0 29 NM

5 6 7 8
Electric Motor /
Automotive Dealer Battery / Energy Storage Electric Utility
Powertrain Provider
Name EV/Rev EV P/E Name EV/Rev EV P/E Name EV/Rev EV P/E Name EV/Rev EV P/E
Magna 0.5 16 8 Sonic 0.3 3 9 Panasonic 0.3 20 14 Entergy 2.3 26 14
Valeo 0.7 12 13 Penske 0.4 8 10 Elentec 0.5 0 NM FirstEnergy 2.5 37 12
Denso 0.8 33 13 Group 1 0.4 4 8 Saft 1.0 1 13 Xcel Energy 3.1 35 18
Cummins 0.9 18 13 AutoNation 0.5 11 12 LG Chem 1.0 17 14 Edison 3.2 36 18
MAN 1.1 17 39 Asbury 0.5 3 10 EnerSys 1.1 3 14 Ameren 3.2 19 19
Delphi 1.5 23 11 Lithia 0.6 5 12 Electrovaya 2.3 0 9 Natl. Grid 3.9 88 16
Eaton 1.7 35 14 CarMax 1.4 20 16 A123 - - NM NextEra 4.7 83 19
Average 1.0 22 16 Average 0.6 8 11 Average 1.0 7 13 Average 3.3 46 17
Tesla 7.0 29 NM Tesla 7.0 29 NM Tesla 7.0 29 NM Tesla 7.0 29 NM

Tesla is not, and will not grow like, a software companyit is an automotive
company, and the automotive industry is mature and famously difficult to disrupt
8
-Attorney Confidential-

By valuation multiples, Tesla is comparable to a social media

giantexcept that it lacks network effects or serious user traction
Comps derived from business model fail to support valuation Valuation-appropriate comp set?

Social Media

Name EV/Rev EV P/E

Yelp 2.2 1 40
SINA 2.7 4 36
LinkedIn 4.4 13 35
Twitter 4.9 11 34
Alphabet 5.6 420 21
Renren 16.2 1 NM
Facebook 16.3 293 34
Average 7.5 106 33
Tesla 7.0 29 NM

VS
Social media companies have Tesla has

Network effects / tipping point economics Word-of-mouth marketing

A dominant platform used by an active user base A subreddit with 30k subscribers

A clear path to user base monetization No ability to sell product at a profit

9
-Attorney Confidential-

Broadly speaking, Teslas multiple places it among industries that

rely on speculative future windfalls; true comparables lie far below
EV / LTM
Revenue Distribution of median revenue multiples across non-financial industries Biotech
14
13
12 Real Estate
11
10
9
8
7 TSLA
Pharma
6
Upstream Oil
5 Twitter Software
4 Transportation Electric Utilities
Square
3 Electrical Chemicals
Automotive
2 Equipment
Retail Electronics
1
0
Where Tesla Percentile Rank Where Tesla
Should Be Currently Is

*Source: Cognient Industry Valuation Multiples, Q3 2015 10

-Attorney Confidential-

Executive Summary
What kind of company is TSLA really? Few companies have ever managed such a broad scope of business models. Its
valuation multiples (when they can be calculated) lie well above its direct business model comparables
TSLA is attempting more vertical integration than any auto company has recently tried
TSLA trades at a higher revenue multiple than any related technology business
TSLAs only comparables in terms of multiple are business models that TSLA is not:
Software companies: TSLA has low / negative margins and heavy fixed asset commitment
Social media companies: TSLA has no network effects, no platform economics and high scaling costs
Biotech or oil explorations companies: TSLA has high marginal costs for every unit it produces

TSLA has relied heavily on existing technology in designing a successful EV model, and while it may have generated some
valuable IP it now controls little of it and has questionable sustainable competitive advantage in technology
TSLAs patents cover battery-related technology and selected components but not battery cells
TSLAs patent holdings are dwarfed by its technology competitors, limiting its freedom to operate in the EV market
where its technology position is modest
TSLAs engineering talent is thin relative to competitors and many productive inventors have left
TSLAs valuable inventions can be readily copied by its EV competitors
TSLAs cost position is heavily dependent on its bargaining positions with strategic suppliers who have an incentive to
price aggressively for their advanced technologies

TSLA is not the green company it claims to be, with environmental risks at all stages of the vehicle lifecycle
TSLA battery production requires the mining and use of numerous toxic chemicals
TSLA EV production has a heavier carbon footprint than traditional vehicles
TSLA vehicles consume lots of energy; battery charging shifts CO2 emissions from car engines to power plants
Disposal of TSLA batteries at large scale will create a heavy toxic burden

11
-Attorney Confidential-

Teslas patents focus on battery peripherals but do not address

battery cells, the key performance driver of their products
TSLA patent portfolio*: semantic map of 357 patent documents

* Worldwide search of grants and applications,

collapsed to one document per distinct invention
12
-Attorney Confidential-

Teslas limited IP footprint is clearly evident in the broader scope

of automotive technologiesthey are exposed in many key areas
Broad automotive space*: semantic map of 24,302 patent families (past 10 years only)

Key
TSLA patents
Non-TSLA patents

* US grants in past 10 years on the topic of

motor vehicle or electric vehicle technology
13
-Attorney Confidential-

Key players in the broad landscape have a long history of

patenting, meaning larger stockpiles of enforceable IP
Broad automotive space*: top assignee filing trends
Rank Company 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 TOTAL
1 GEN MOTORS CORP 43 39 52 47 1 36 28 34 22 37 32 39 48 94 254 281 273 398 504 280 300 2841
2 TOYOTA MOTOR CO LTD 19 35 51 59 42 31 42 38 51 42 31 36 76 161 324 201 322 399 349 407 2716
3 BOSCH GMBH ROBERT 23 30 52 67 92 92 91 88 101 95 88 85 104 99 137 147 192 248 321 276 2428
4 FORD MOTOR CO 54 58 77 53 45 41 48 66 59 58 57 76 73 103 187 129 175 281 258 443 2341
5 HONDA MOTOR CO LTD 41 66 59 62 75 71 63 58 80 102 53 59 59 107 187 139 170 268 182 216 2117
6 DAIMLER AG 25 27 49 47 106 116 87 60 51 55 65 60 73 2 65 36 48 59 63 61 61 1214
7 DENSO CORP 0 1 14 32 40 47 29 31 49 57 38 40 56 91 81 69 99 101 88 127 1090
8 YAZAKI CORP 28 56 75 56 51 36 44 40 34 39 16 22 35 39 43 33 61 96 86 153 1043
9 CONTINENTAL 3 0 0 0 0 3 12 11 8 8 7 10 19 31 58 145 107 136 170 118 173 1016
10 NISSAN MOTOR 15 21 39 41 51 31 28 40 38 64 30 35 39 39 31 23 47 94 109 159 974
11 VALEO 13 23 50 37 25 41 29 29 33 16 21 46 51 61 70 66 65 143 81 85 985
12 ZF GROUP 5 1 3 4 4 10 7 5 11 10 32 34 57 72 136 82 96 94 80 79 822
13 HYUNDAI MOTOR CO LTD 4 6 18 12 10 10 14 16 8 9 7 7 11 13 71 69 48 90 96 91 158 764
14 PORSCHE AG 4 6 4 9 7 11 8 15 12 21 19 25 43 84 86 72 79 70 72 92 739
15 PANASONIC CORP 2 5 12 15 15 15 14 19 29 18 16 14 29 55 60 32 81 92 69 122 714
16 BMW AG 2 4 12 2 10 11 14 9 15 17 9 29 44 89 71 52 70 83 77 85 705
17 MITSUBISHI ELECTRIC CORP 15 37 21 23 10 26 22 17 14 23 10 14 26 23 47 22 41 79 45 103 618
18 DELPHI TECH INC 0 0 0 1 16 34 64 96 63 47 43 31 31 39 30 18 20 20 21 20 594
19 SUMITOMO WIRING 24 19 22 17 9 13 16 15 23 12 3 4 9 27 59 41 54 60 48 78 553
20 SIEMENS AG 3 6 5 5 19 36 48 23 38 35 54 47 45 45 20 15 14 3 8 9 14 487

85 TESLA MOTORS INC 0 0 0 0 0 0 0 0 0 0 0 06 2 2 13 8 14 29 20 22 110

1 Sustained leadership with recent ramp-up 2 Secondary cohort contributing significant R&D spend
3 Recent ramp-up / expansion in scope 4 Re-investment following R&D down-cycle
5 Transient R&D productivity 6 Niche player with short history of innovative activity

* US grants and applications in the past 20 years on the topic of

motor vehicle or electric vehicle technology, collapsed by family 14
-Attorney Confidential-

As a technology owner, Teslas patent holdings in key topic areas

are dwarfed by its direct competitors in the automotive space
Patent counts* in core automotive topic areas

* INPADOC families filed in past

20 years, worldwide patent search 15
-Attorney Confidential-

Within even the more narrowly specified electric vehicles space,

Teslas portfolio accounts for a small share of total R&D activity
Electric vehicle* patent citation network

Key

More EV patents
than TSLA

TSLA

Fewer EV patents
than TSLA

*Source: Search on electric vehicle keywords returning ~13k INPADOC families

filed in past 20 years. Chart shows assignees with 50+ patent families in set 16
-Attorney Confidential-

Teslas Model S battery technology builds on pioneering

innovation by EV competitors these patents are still enforceable
Publication
Patent No. Title Assignee Inventors Year Citations

US7679336B2 Interactive battery charger for Ford Allan Gale 2010 50

electric vehicle Michael Degner

Battery unit mounting structure Takasaki Seiichi

US7610978B2 Mitsubishi 2009 55
for electric vehicle Shimura Nobuyuki

System and method for

James Hafner
US7013205B1 minimizing energy IBM 2006 226
Anthony Tomlin
consumption in hybrid vehicles

Method for resetting a state of

US6841972B2 charge of a battery of a hybrid Hyundai Jae Seung Koo 2005 26
electric vehicle

Method for adjusting battery

William Cawthorne
US6868318B1 power limits in a hybrid EV to GM 2005 257
Gregory Hubbard
provide consistent launch

Battery assembly system used Minamiura Keiichi

US6541151B2 Toyota 2003 52
for electric vehicle Nakanishi Toshiaki

Tesla has proudly Open Sourced and abandoned its Intellectual Property, but other
companies have not, and are under no obligation to abandon their rights

17
-Attorney Confidential-

Tesla has orders of magnitude less patent protection than

competitors in any of the related industries in which it participates
Patent Count*
100,000
Automotive Manufacturer / Designer
Battery / Energy Storage Panasonic HP Canon Hitachi Samsung
Consumer Electronic Device Maker Honda IBM Microsoft
Fujitsu Sony GM
Electric Motor / Powertrain Provider Toshiba Oracle
Sharp LG
10,000 Denso Cisco Daimler
Software Company
Valeo Delphi Continental VW Ford
Systems Integrator Apple
LG Chem SAP Nissan
Eaton
Tesla Motors Symantec
Magna
Rockwell Automation Adobe
Cummins
1,000 MAN
Intuit
Citrix
Salesforce
Tesla
Saft Groupe
100 EnerSys

TEV
(MM USD)
10
100 1,000 10,000 100,000 1,000,000

* INPADOC families filed in past

20 years, worldwide patent search 18
-Attorney Confidential-

Teslas small inventor group highlights their lack of R&D depth in

an industry with vast inventive resources

Inventor Co-Occurrence Networks

Tesla: 114 inventors

i with >2 patents Ford: 3245 inventors with >2 patents

Beyond the overwhelming difference in scale, Teslas small core inventor team is a
source of fragilityR&D quality relies on the consistent output of a small talent base

19
-Attorney Confidential-

The core inventor team is fragile: of the 16 inventors with 5+ co-

authored patents, 10 have since left Tesla for other opportunities

IP Counsel

Key

Currently employed by TSLA

No longer employed by TSLA

20
-Attorney Confidential-

Why patents matter: battery and automotive technology is

complicated, and keeping up requires every advantage possible
TSLA battery patents: 9-grams in claim language

21
-Attorney Confidential-

Teslas technology would risk being copied even if it owned all the
patents assigned to itbut it has actually given its IP away

Patents have no value beyond the ability to enforce them; unless this is a PR platitude with no real-
world meaning, then TSLA has discarded a key source of competitive advantage

Translation: please do not sue us, established auto manufacturers of the world! Engineers do build
technology leadership, but IP (and the threat of mutually assured destruction) maintains it

22
-Attorney Confidential-

Tesla imports large volumes of strategic components in a supply

network that is volatile and poorly understood

Two 10x swings in

less than a year

23
-Attorney Confidential-

Teslas need to reduce cost requires tough negotiations with

numerous strategic suppliers, possibly leading to drastic recent shifts
Top Tesla suppliers, containers per year Drastic supply shifts October 15
J-13 F-13 M-13 A-13 M-13 J-13 J-13 A-13 S-13 O-13 N-13 D-13 J-14 F-14 M-14 A-14 M-14 J-14 J-14 A-14 S-14 O-14 N-14 D-14 J-15 F-15 M-15 A-15 M-15 J-15 J-15 A-15 S-15 O-15 N-15 D-15 J-16 F-16
Sanyo Electric Co. Ltd. 43416 34532 48600 51605 50760 62650 41040 80460 73374 75384 99360 81297 74376 95040 1E+05 84240 1E+05 1E+05 68178 69120 2E+05 2E+05 2E+05 28080 1E+05 2E+05 3E+05 1E+05 30247 2E+05 1E+05 1E+05 2E+05 2E+05 2E+05 2E+05 2E+05 2E+05
Luvata Pori Oy 48 47 58 58 33 33 34 35 33 29 60 70 69 102 41 0 121 120 62 35 12 4 118 0 15 107 251 127 124 178 129 90 78 79231 4E+05 1E+05 9E+05 3E+05
Fukuta Electric & Machinery Co.,Ltd 28 21 97 159 100 176 145 240 195 177 116 183 126 155 210 214 298 230 283 208 136 7890 15241 4080 7620 12208 12533 28856 27310 30468 26324 22950 24616 10460 31226 27780 37734 6250
Ceramtec Gmbh 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 12483 4 1 0 1 2 4 31201 62400 46800 78000 54600
Ningbo Jinyi Automotive Parts 5509 5244 5227 5079 7410 4692 5302 5388 6958 5797 4254 7704 4988 7070 1718 5714 9170 11822 6013 18389 15167 14220 12304 1457 6857 7055 13743 7195 3304 1245 2561 4900 6139 7646 0 0 0 1155
Hota Industrial Mfg. Co., Ltd. 836 668 2428 2073 4100 248 1708 2791 2366 2244 1718 3660 2841 3808 1647 4147 5722 4872 3379 993 7441 5171 4171 1306 3143 5308 10115 8802 3950 7662 8846 10151 5706 7068 12371 9541 8309 2961
Srems Zhongshan Cenity Electronic 7200 2599 3006 9776 7930 4288 23695 9196 9752 6429 6729 6337 3045 5968 2538 4364 3634 6499 3883 3430 1840 1450 500 0 1080 540 1200 1470 1000 300 1080 360 0 0 0 0 0 0
Pektron Plc 1 7584 0 63 28 7 41 31 0 0 0 0 0 0 0 0 0 0 0 0 55 73 39 19 35 62 41 82 98 124 37 39 4549 20098 19120 24388 24406 22608
Barum Continental Spol Sro 2000 2300 5000 5000 3948 2787 6 2000 1800 2216 0 0 1600 600 1432 1728 4682 3864 1296 5616 4320 3888 4321 864 1296 1296 11231 6406 6912 8208 1728 1728 2160 432 1296 1728 4752 4035
Nishikawa Rubber Co., Ltd. 1399 1765 1428 1565 1310 1146 1422 2146 1633 2824 2086 1226 2559 2076 2433 3015 2950 1693 2167 3147 3378 2346 2858 1266 3804 1942 4110 4202 3888 3456 3930 4886 2240 3702 3956 3968 3622 2508
Premo Mediterranee Sarl 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 61 4 1 3 0 13 9 2 10 5 6 10 36 26136 27 39921 33780
Amtek(Suzhou) Precision Engineering 240 1558 2904 729 762 3283 1948 0 0 0 0 0 34 0 0 0 0 48 408 0 4690 5790 3256 0 2753 678 3613 6623 4663 4343 6807 3547 4083 6379 5333 5733 5917 2105
Amtek Plastic (Shenzhen) Ltd 0 0 115 170 214 196 121 88 319 121 1003 62 731 1324 1158 1945 2452 2453 1359 2767 1211 4735 1596 879 1706 415 5745 2982 2428 3491 3746 2896 3977 5438 3959 4892 3573 3238
Wabco Fahrzeugsysteme Gmbh 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 37 700 22500 20272 17900 11000
Dura Automotive Systems Gmbh 0 3 2 3 2 1 6 1 0 0 0 0 0 0 0 0 0 0 0 0 6 10 9 4 3 6 7 4 4 8 8 10 23 3971 18793 13146 14073 22270
Sixxon Precision Machinery Co., Ltd 705 1024 1242 983 387 722 1132 1083 954 1037 1084 1223 301 2487 843 1771 2287 1898 1277 565 3551 2252 1823 350 1298 2331 1098 3948 1673 1604 1378 2203 1679 1697 1940 1705 2595 405
Fuji Polymer Industries Co., Ltd. 1350 1305 1260 945 765 900 900 900 1485 1825 1848 3150 900 1848 2700 1944 1944 1944 3036 1044 1992 1140 1944 0 1044 2088 2256 1044 900 2088 1992 2161 192 1164 1080 1080 1164 1068
Tesla Motors Netherlands 0 0 0 21 0 0 0 2 48 0 0 0 6 74 66 260 1200 1194 1786 519 1409 1882 964 234 2806 571 1646 2859 1204 1417 2163 1475 2749 2637 1981 3635 2653 18335
Leopold Kostal Gmbh & Co Kg 0 58 43 0 9 0 32 26 0 0 0 0 0 0 0 0 0 0 0 0 3 15 4 0 7 3 4 3 4 1 2 7 2 6386 17626 15491 5480 7305
Panasonic Corporation 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 600 1080 1872 3852 3840 1596 0 2220 2400 1140 3840 3480 2112 1536 3636 1320 2652 5160 1716 3732 2928
Rogers Technologies (Suzhou)Co.,Ltd 1760 326 988 356 712 906 916 2113 1240 1195 1740 1395 1546 1382 1465 920 686 631 447 206 2594 2350 1245 0 846 1074 1230 3074 1479 1698 979 1292 1198 2090 1690 2768 2106 1632
Transtek Magnetics Ltd. 0 0 0 0 0 0 0 0 302 389 884 882 1616 812 51 767 964 1287 683 549 1688 1637 4207 0 1195 3346 2606 2506 2106 2390 843 1706 1442 2862 2534 2231 2968 1350
Flextronics International Kft 19 127 85 53 90 85 156 138 55 93 121 33 224 43 88 99 187 66 0 176 222 160 184 61 49 119 376 165 303 233 254 110 1027 8986 8000 7468 13002 4044
Huf Huelsbeck & Fuerst Gmbh & Co Kg 0 0 0 12 10 9 33 11 0 0 0 0 0 0 0 0 0 0 0 0 34 30 26 5 20 18 30 21 27 30 27 22 28 4359 14428 10 15204 10936
Isabellenhuette Heusler Gmbh & Co K 0 0 0 0 10 10 15 15 0 0 0 0 0 0 0 0 0 0 0 0 28 32 27 28 22 12 38 7 7 10 22 26 17 6000 3950 10300 12000 11200
Bizlink Technology Inc 256 619 143 667 311 371 873 324 833 491 392 279 685 1068 315 430 815 918 861 1331 1738 1382 2365 0 569 1790 971 1826 1443 1850 793 1144 2031 2332 2479 2248 3081 1887
Csf Poland Sp Zoo 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 6 4762 12897 89 14200 8179
Magnetec-Ungarn Kft. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 15 18 5962 7560 6440 10360 8400
Metalsa Automotive Hainichen 0 0 0 0 0 0 0 2 0 0 0 0 0 0 0 0 0 0 0 0 10 20 20 0 12 18 20 18 20 8 26 22 16 6726 5760 9120 11520 4806
Halla Visteon Climate Control Corp. 598 605 428 706 760 338 1130 1145 928 1229 920 690 1130 848 1227 943 1649 1735 1385 1321 1386 1308 1458 244 1208 1832 1638 2171 1587 1447 1385 784 0 0 0 0 0 0
U-Shin Slovakia Sro 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 8594 2232 15688 4920
Khl Interior Gmbh 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4 8 10 4 8 10 2921 4554 6716 6456 3648
Viasystems Asia Pacific Co Ltd 0 789 416 518 366 106 251 181 493 1175 158 339 246 1084 333 337 1021 818 616 501 952 1185 1266 0 346 218 1136 943 756 483 391 651 769 1676 419 1158 776 753
Tpk Touch Solution(Xiamen)Inc. 7 2 16 15 11 13 312 432 384 500 341 360 413 636 516 874 392 445 609 345 722 720 848 0 449 865 656 1176 624 880 624 768 832 900 1256 1077 1353 89
Hongfujin Precision 138 420 186 120 124 310 260 391 324 373 403 484 416 421 226 376 485 366 307 0 706 594 378 190 743 849 691 247 1178 1095 1685 494 1492 557 548 959 1003 296
Ningbo Yexing Automotive Part Co., 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 5579 6821 6357 843
Tesla Motors Hk Ltd 10 0 1 0 0 0 3 0 0 0 0 0 0 0 5 0 0 0 0 0 23 0 0 0 3712 0 0 0 5016 0 0 12 0 5184 0 0 5136 0
Gaoyao Hongxing Precision Casting 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 480 1976 4621 10048 1860
Connor Manufacturing(Suzhou)Co.Ltd. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 63 0 315 630 918 1328 1717 1860 5 21 6 989 2410 2518 2245 1692
Hanon Systems. 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 679 1209 3510 3002 3351 2629 1801
Brembo Spa 139 164 88 18 115 142 117 109 81 177 146 2488 106 124 256 134 273 397 322 47 166 301 273 16 101 56 146 136 162 233 142 106 119 2806 154 230 167 5144

Abrupt supply Abrupt supply December effect

ramp-ups discontinuations 24
-Attorney Confidential-

Tesla is increasingly dependent on battery and motor imports

The smoking gun: as

deployment of diverse
motor parts increases, the
probability of patent
infringement increases

25
-Attorney Confidential-

Teslas cost position is driven by negotiations with suppliers (e.g. Panasonic and
Fukuta) with incentives to charge high prices for advanced technologies
Aluminum (for doors, hood, etc.) Batteries Motors & motor parts
Supplier # bills Supplier # bills Supplier # bills
Constellium France Sas 67 Sanyo Electric Co. Ltd. (Panasonic) 521 Fukuta Electric & Machinery Co.,Ltd 251
Constellium Neuf Brisach 40 Lg Electronics Inc 56 Da Horn Refining Co., Ltd. 79
Constellium Singen Gmbh 23 Tesla Motors Netherlands 52 Faurecia (Wuxi) Seating Components 75
Toyota Tsusho Corporation 12 Amtek Plastic (Shenzhen) Ltd 49 Kuen Tong Industrial Co., Ltd. 62
Sanmina-Sci Enclosure System 11 Samsung Sdi Co.,Ltd 19 Ningbo Xusheng Auto Technology 60
Premo Mediterranee Sarl 7 Ningbo Jinyi Automotive Parts 10 Hongfujin Precision 41
King Lai International Co., Ltd. 2 Tesla Motors Ltd 7 Igarashi Electric Works Hk Ltd 38
Aleris Aluminium Duffel Bvba 1 Samsung Sdi Co.,Ltd. 5 Mabuchi Taiwan Co., Ltd. 35
Constellium 1 Tesla Motors Japan Kk 5 Amtek Plastic (Shenzhen) Ltd 34
Hunan Xiangtou Goldsky Titanium 1 Shenzhen Tat Fook Tech Co Ltd 4 Tesla Motors Taiwan Limited 28
Kobe Steel, Ltd. 1 Tesla Automobile Distribution 4 Semyung Industrial, Co., Ltd. 18
Kobe Steel,Ltd. 1 Atlasbx Co., Ltd. 3 Sixxon Precision Machinery Co., Ltd 16
Mga International 1 Tesla Motors Hk Ltd 3 Brembo Spa 15
Odawara Engineerinbg Co.,Ltd. 1 Aig Verpackungs Gmbh 1 Faurecia (Yancheng) Automotive Syst 12
Sanmina-Sci Enclosure Systems 1 Brabus Gmbh 1 Central Corporation 10
Shenzhen Meinie Tool & Die Co Ltd 1 Galliker Transport Ag 1 Eaton Automotive Controls Ltd. 10
Srems Zhongshan Cenity Electronic 1 Jiu-Bor Industrial Co.,Ltd. 9
Basic industrial commodity Valuable semi-commodity Critical technology chokepoint

Tesla does not own its IP, and worse, it doesnt own the technology within its motors.
As soon as Tesla becomes profitable its margins will be drained by its vendor network

26
-Attorney Confidential-

Executive Summary
What kind of company is TSLA really? Few companies have ever managed such a broad scope of business models. Its
valuation multiples (when they can be calculated) lie well above its direct business model comparables
TSLA is attempting more vertical integration than any auto company has recently tried
TSLA trades at a higher revenue multiple than any related technology business
TSLAs only comparables in terms of multiple are business models that TSLA is not:
Software companies: TSLA has low / negative margins and heavy fixed asset commitment
Social media companies: TSLA has no network effects, no platform economics and high scaling costs
Biotech or oil explorations companies: TSLA has high marginal costs for every unit it produces

TSLA has relied heavily on existing technology in designing a successful EV model, and while it may have generated some
valuable IP it now controls little of it and has questionable sustainable competitive advantage in technology
TSLAs patents cover battery-related technology and selected components but not battery cells
TSLAs patent holdings are dwarfed by its technology competitors, limiting its freedom to operate in the EV market
where its technology position is modest
TSLAs engineering talent is thin relative to competitors and many productive inventors have left
TSLAs valuable inventions can be readily copied by its EV competitors
TSLAs cost position is heavily dependent on its bargaining positions with strategic suppliers who have an incentive to
price aggressively for their advanced technologies

TSLA is not the green company it claims to be, with environmental risks at all stages of the vehicle lifecycle
TSLA battery production requires the mining and use of numerous toxic chemicals
TSLA EV production has a heavier carbon footprint than traditional vehicles
TSLA vehicles consume lots of energy; battery charging shifts CO2 emissions from car engines to power plants
Disposal of TSLA batteries at large scale will create a heavy toxic burden

27
-Attorney Confidential-
Finally, all-electric vehicles are not as sustainable as they may
seem; this is a serious brand risk and an unknown legal exposure
Battery Sourcing
Graphiteis mined and processed
in China where graphite pollution
has fouled air and water, damaged
crops and raised health
concernsTesla
concernsTesla
Teslas factory alone
could double demand for graphite
in batteries. -- Bloomberg
Initial production of the vehicle
and the batteries together make up
something like 40 percent of the
total carbon footprint of an EV
EV
nearly double that of an equivalent
gasoline-powered vehicle. -- EC
The extraction of lithium has
significant environmental and social
impacts,
impacts especially due to water
pollution and depletion. -- EC
Battery Charging
When a wire is connected to an
electric vehicle at one end and a
coal-fired power plant at the other
end, the environmental
consequences are worse than
driving a normal gasoline-
gasoline-powered
carall-
carall-electric vehicles cause 86%
more deaths from air pollution
than do cars powered by regular
gasoline. -- Carnegie Inst. for Sci.
A carbon emissions surcharge [was]
slapped onthe Model S [in
Singopore for]an equivalent CO2
emission of 222g/km. The
emissions were calculated using a
"grid emissions factor" [for]
emissions created by energy use
when its battery converts electricity
into power -- CNBC
Battery Disposal
The recovery rate of lithium ion
batteries, even in first world
countries, is in the single digit
percent range. Most batteries end
landfill -- Tech Metals
up in landfill.
Insider
The environmental impacts
include resource depletion, global
warming, and ecological toxicity
primarily resulting from the
production, processing, and use of
cobalt and nickel metal
compounds,
compounds which can cause
adverse respiratory, pulmonary,
and neurological effects in those
exposed. -- ABT Associates
28
-Attorney Confidential-

Pounds of toxic cobalt and unstable lithium are present in each

Tesla EV, and present a serious safety (as well as moral) hazard
Cobalt
Tesla Battery Pack
Immediately dangerous to life and health at 20
mg / m3 (microgram / L)

A Tesla EV contains 18 pounds of cobalt

distributed throughout the battery cells

This toxic concentration of a dangerous heavy

metal is core to Tesla vehicle performance

Lithium

Lithium in damaged battery cells is known to

lead to spontaneous and violent explosions

The Model S stores 30 pounds of lithium in

cells with reduced individual safety features

What happens when aging Tesla batteries get

compacted and punctured in landfills?
From US20150111082A1: Cell Module Assemblies

Just as switching from tobacco cigarettes to e-cigarettes is still bad for your health,
switching from gas automobiles to electric vehicles is still bad for the environment

29
-Attorney Confidential-

On market price adjustments:

Theres a man goin round takin names.

An he decides who to free and who to blame.
Everybody wont be treated all the same.
Therell be a golden ladder reaching down.
When the man comes around.

-Johnny Cash

30
-Attorney Confidential-

Thank you

For more information, please contact Devonshire Research Group, LLC on Bloomberg: SURFHACKER