Filed by Tesla Motors, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6
under the Securities Exchange Act of 1934
Filer: Tesla Motors, Inc.
Subject Company: SolarCity Corporation
Form S-4 File No.: 333-213390
Date: October 25, 2016
The following presentation was given by Tesla to Institutional Shareholder Services Inc. on October 25, 2016.
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TESLA TO ACQUIRE SOLARCITY TESLA Solarcity Presentation to Proxy Advisory Firms October 2016
DISCLAIMERSF O R W A R D—L OOK IN G S T A T E M E N T S ; A D D I T I O N A L I N F O R M A T I O N Certain statements in this document, including statements relating to the proposed combination of SolarCity Corporation (“SolarCity”) and Tesla Motors, Inc. (“Tesla”) and the combined company’s future financial condition, performance and operating results, strategy and plans are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. Forward-looking statements speak only as of the date they are made and we assume no duty to update forward-looking statements. In addition to factors previously disclosed in Tesla’s and SolarCity’s reports filed with the U.S. Securities and Exchange Commission (the “SEC”) and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward-looking statements and historical performance: the ability to obtain regulatory approvals and meet other closing conditions to the transaction, including requisite approval by Tesla and SolarCity stockholders, on a timely basis or at all; delay in closing the transaction; the ultimate outcome and results of integrating the operations of Tesla and SolarCity and the ultimate ability to realize synergies and other benefits; business disruption following the transaction; the availability and access, in general, of funds to meet debt obligations and to fund ongoing operations and necessary capital expenditures; and the ability to comply with all covenants in the indentures and credit facilities of Tesla and SolarCity, any violation of which, if not cured in a timely manner, could trigger a default of other obligations under cross-default provisions.The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the Risk Factors included in Tesla’s and SolarCity’s most recent reports on Form 10-K and Form 10-Q and other documents of Tesla and SolarCity on file with the Securities and Exchange Commission. Tesla’s and SolarCity’s SEC filings are available publicly on the SEC’s website at www.sec.gov. Any forward-looking statements made or incorporated by reference herein are qualified in their entirety by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us or our business or operations. Except to the extent required by applicable law, Tesla and SolarCity undertake no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.I M PO RT A N T A D D I T I O N A L I N F O R M A T I O N A N D W H E R E T O F I N D I TThe transaction will be submitted to the stockholders of each of SolarCity and Tesla for their consideration. In connection with the proposed merger, Tesla has filed with the SEC a Registration Statement on Form S-4 (Registration Statement No. 333-213390) containing a joint proxy statement/prospectus of SolarCity and Tesla. The Registration Statement was declared effective by the SEC on October 12, 2016, and SolarCity and Tesla mailed the definitive joint proxy statement/prospectus to stockholders of SolarCity and Tesla on or about October 13, 2016. Tesla and SolarCity also plan to file other relevant documents concerning the proposed transaction. INVESTORS AND SECURITY HOLDERS OF SOLARCITY AND TESLA ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/ PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IN CONNECTION WITH THE TRANSACTION OR INCORPORATED BY REFERENCE IN THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. You may obtain copies of all documents filed with the SEC regarding this transaction, free of charge, at the SEC’s website, www.sec.gov.N O O F F E R O R S O L I C I T A T I O NThis document does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended. P A R T IC IP A N TS I N T H E S O L I C I T A T I O NSolarCity, Tesla, and certain of their respective directors, executive officers and other members of management and employees, under SEC rules may be deemed to be participants in the solicitation of proxies from SolarCity and Tesla stockholders in connection with the proposed transaction. Information regarding the interests of the persons who may, under the rules of the SEC, be deemed participants in the solicitation of SolarCity and Tesla stockholders in connection with the proposed transaction is set forth in the definitive joint proxy statement/prospectus, which was filed with the SEC on October 12, 2016. You can find more detailed information about SolarCity’s executive officers and directors in its definitive proxy statement filed with the SEC on April 21, 2016. You can find more detailed information about Tesla’s executive officers and directors in its definitive proxy statement filed with the SEC on April 15, 2016.
T O D A Y ’ S P R E S E N T E R S R O B Y N D E N H O L MIndependent DirectorE L O N M U S KChairman and Chief Executive OfficerT O D D M A R O NGeneral Counsel and Corporate SecretaryJ A S O N W H E E L E RChief Financial Officer 3 ? TESLA . C O M
E X E C U T I V E S U M M A R YCOMBINATION CONSISTENT WITH TESLA ’ S MISSION AND ACCELERATES LONG—TERM GROWTH S T R A T E G Y• Tesla’s long-term purpose is to help expedite the move from a mine-and-burn hydrocarbon economy towards a solar electric economy• Focused on innovative integration of energy generation, storage and consumption to accelerate transition to a sustainable futureS T R A T E G I C C O M B I N A T I O N C R E A T E S T H E W O R L D ’ S O N L Y I N T E G R A T E D S U S T A I N A B L E E N E R G Y C O M P A N Y• Accelerates the transition to sustainable energy by enhancing the value proposition of solar + storage• Drives product development and innovation by fully integrating each company’s product suite and leveraging Tesla’s expertise in electrical engineering and manufacturingH I G H L Y C O M P L E M E N T A R Y O F F E R I N G S• Leverages Tesla’s design and manufacturing expertise to drive development of beautiful, differentiated and technologically superior products• Customers of the two companies have shared ideals and benefit from the combined offerings of solar products, energy storage and electric vehiclesTE S L A H A S A T R A C K R E C O R D O F S U C C E S S• EV market leader and has built the world’s largest high-speed EV charging network • Develops innovative energy storage products (Powerwall and Powerpack)S U B S T A N T I A L C O S T E F F I C I E N C I E S A N D R E V E N U E S Y N E R G I E S D R I V E I M P R O V E D C A S H F L O W • $150mm of direct cost synergies from sales & marketing efficiencies and overhead savings expected to be achieved in the first full year after closing• Apply Tesla cost discipline and partnership approach to the combined company’s capital expenditure roadmap and cost structure• Combining Tesla and SolarCity allows for SolarCity’s products to benefit from Tesla’s loyal customer following and large retail footprint, leading to the potential for significantly increased revenueT E S L A B O A R D O F D I R E C T O R S C O N D U C T E D A T H O R O U G H A N D F A I R P R O C E S S• Over the course of many meetings, and with the assistance of independent financial and legal advisors, the Tesla Board of Directors reviewed the strategic and financial implications of the transaction and considered its financial advisor’s view that SolarCity was the most attractive asset for Tesla in the solar energy industry• The deal was approved by the Tesla Board after comprehensive due diligence, deliberation and arms-length extensive negotiationsT E S L A H A S C O N D U C T E D E X T E N S I V E S H A R E H O L D E R O U T R E A C H• Tesla has actively engaged and had discussions with investors who hold a majority of Tesla unaffiliated shares• The vast majority of Tesla’s large institutional investors understand the strategic rationale of the combination and how it accelerates Tesla’s long-term strategy4 ? TESLA . C O M
AGENDA I . S T R A T E G I C R A T I O N A L EI I . F I N A N C I N G A N D L I Q U I D I T Y I I I . G O V E R N A N C E A N D P R O C E S SI V . C O N C L U S I O NA P P E N D I X5 ? TESLA . C O M
I. S T R A T E G I C R A T I O N A L E6 ? TESLA . C O M
A C C E L E R A T I N G T E S L A ’ S L O N G—T E R M S T R A T E G YTESLA HAS ALWAYS SOUGHT TO HELP • Innovative vertical integration of energy generation, storage EXPEDITE THE MOVE FROM A MINE-AND- and consumption to develop sustainable energy products BURN HYDROCARBON ECONOMY Tesla’s residential, commercial and • utility-scale energy TOWARDS A SOLAR ELECTRIC ECONOMYstorage products introduced in 2015 The Secret Tesla Motors Master Plan, August 2, 2006??Storage increases electric system efficiency, leading to lower cost overall to customers and grid operators??Storage allows for higher levels of renewable penetration, while supporting grid operations broadly• Gigafactory supports global scale production of lithium-ion batteries7 ? TESLA . C O M
T O D A Y ’ S E N E R G Y L A N D S C A P ERecord High CO2 Levels400300 PPM200-400,000 -300,000 -200,000 -100,000 0 YearsSource: Mauna Loa Observatory, Vostok Ice Core, Law Dome Ice CoreSustainable Transportation• One-third of all fossil fuels consumed in the United States is used in transportation and another third is used in electricity production• Tesla has created a market for electric vehicles and established itself as the world’s fastest-growing automaker, accelerating the transition to a sustainable energy futureUS Energy Production• 82% of total energy consumed is produced from fossil fuels• One-third of all fossil fuels consumed in the United States is used in transportation and another third is used in electricity production• 94% of CO2 emissions result from fossil fuel combustion• ~ 7,000 million metric tons of CO2 equivalent produced annually Source: U.S. EPASolar Landscape• The sun’s potential as a renewable energy source is limited by intermittency; energy needs extend beyond daylight hours• Opposition to net metering programs in the US threatens homeowners’ ability to sell excess generation back to the grid• Aesthetics and cost of current solar systems can be significantly improved8 ? TESLA . C O M
A H I G H L Y C O M P L E M E N T A R Y , S T R A T E G I C C O M B I N A T I O NS T R A T E G I C C O M B I N A T I O N C R E A T E S T H E W O R L D ’ S O N L Y I N T E G R A T E D S U S T A I N A B L E E N E R G Y C O M P A N Y• Creates a vertically integrated energy company offering end-to-end clean energy products• With a Model S, Model X, or Model 3, a solar panel system, and a Powerwall, consumers can deploy and consume energy in an efficient and sustainable way, lowering costs and minimizing dependence on fossil fuels and the utility gridEXPAND S ADDRESSA B L E M A R K E T• Expands Tesla’s total addressable market to include the solar market, a $12bn(1) market in the US alone that is expected to grow at a compounded annual growth rate of 15% and 20% in the next 5 years• Huge opportunity in roof market as five million US households replace roofs each year• Customers of the two companies have shared ideals and benefit from the combined offerings of solar products, energy storage and electric vehiclesL E V E R A G E S C O R E C O M P E T E N C I E S O F E A C H C O M P A N Y• Tesla’s experience in design, engineering, and manufacturing will help to advance solar panel technology, including by making solar panels more aesthetically pleasing• Combination enables Tesla to provide the best possible installation service for Powerwalls and charging systems by utilizing SolarCity’s best-in-class installation team and also allows Tesla to leverage SolarCity’s expertise in offering customer-friendly financing productsSUBSTANTIAL COST EFFICIENCIE S AND REVENUE SYNERGIES• $150mm of direct cost synergies expected in the first full year after closing, driven by sales & marketing efficiencies and corporate & overhead savings• Leverage Gigafactory’s global scale battery cell production facility for reduced production costs• Drive revenue synergies through simplifying access to sustainable energy products and leveraging complementary channel strengthsG R E A T C U L T U R A L F I T• Shared mission of sustainability, innovation and overcoming challenges that stand in the way of progress toward these goals(1) Value of new US residential and commercial and industrial solar installations9 ? TESLA . C O M
C R E A T E S T H E W O R L D ’ S O N L YI N T E G R A T E D S U S T A I N A B L E E N E R G Y C O M P A N YS U S T A I N A B L E E N E R G Y G E N E R A T I O N• Solar has become the most affordable renewable energy source due to lower component costs and system prices• With the federal ITC extended through 2021 (from its prior expiration in 2016), US solar is expected to account for more than 6% of operating electric generating capacity by 2021, compared to just 0.3% at the beginning of this decade??In the first half of 2016, solar accounted for 26% of all new electric generating capacity brought on-line in the USSource:US Solar Market Insight Q3 2016, Greentechmedia• The ability to fully harness the sun’s potential as an energy source is limited by its intermittency and inability to access energy at night ??Energy storage solves both these problems• Key Benefits of solar + storage: ??Store solar energy for use at night??Provide emergency backup power??Shift energy consumption to times when electricity is cheaper??Reduce peak demand charges??Participate in demand response programs??Reduces reliance on net-metering subsidiesS U S T A I N A B L E T R A N S P O R T A T I O N• To create sustainable transportation, energy sources also need to be renewable. Solar is a highly efficient source of sustainable energy• Demand for battery electric vehicles has risen significantly in the past four years, growing at an ~85% CAGR in North American region• Declining battery costs and improvements in vehicle range are expected to further accelerate growth of electric vehicle adoption• Tesla’s product innovation, global network of world’s largest high-speed charging stations and sales and service centers have accelerated widespread adoption of electric vehicles10 ? TESLA . C O M
L E V E R A G E T E S L A ’ S D E S I G N E X P E R T I S E A N D D I S T R I B U T I O N T O D R I V E S O L A R E N E R G Y A D O P T I O NH I G H L Y C O M P L E M E N T A R Y O F F E R I N G SS O L A R P O W E R W A L L / G R I D S E R V I C E S R O O F I N G P O W E R P A C K S O F T W A R E• Accelerate development of beautiful, differentiated and technologically superior products• Leverage Gigafactory’s ability to produce cells that support combined Tesla / SolarCity products, enabling greater economies of scale • Fully integrated product suite for a seamless user experience, delivering an improved, lower-cost product for customers• Develop products for residential, commercial and grid-scale applicationsCROSS -S E L L I NG S Y N E R G I E S L E V E R A G I N G T E S L A D I S T R I B U T I O N• 190+ retail locations, 3 million engaged store visitors annually• Broadened geographic growth opportunities via Tesla’s international reach• Customers have overlapping product interest• Single ordering experience, installation and service contact• Potential to expand solar offerings into new US and international marketsT ESL A S T O R E S & G A L L E R I E SS O L A R C I T YC O V E R A G E 11 ? TESLA . C O M
D R I V I N G S H A R E H O L D E R V A L U E A N D R E D U C I N G C U S T O M E R C O S T SGIGAFAC T O R Y E N A B L E S L O W C O S T E N E R G Y S T O R A G E• Gigafactory is on track to begin cell production later this year and will quickly scale to become the world’s largest lithium ion cell manufacturing facility• By reducing storage cost with Gigafactory cells, Tesla will ramp production of energy storage products that complement solar energy systems• Leverage Gigafactory’s ability to produce cells that would support combined Tesla / SolarCity products, enabling greater economies of scale D R I V E S I N N O V A T I V E P R O D U C T D E V E L O P M E N T• Combining both companies’ technology expertise speeds the development of new innovative productsI N C R E A S E C U S T O M E R C O N V E N I E N C E A N D L O W E R N O N—S Y S T E M C O S T S• By lowering sales and installation costs, the combined company provides a better customer experience and increases shareholder valueS H I F T F R O M L E A S I N G T O S E L L I N G S O L A R• Tesla intends to continue the transition initiated by SolarCity from leasing to selling solar systems• This transition improves profitability and reduces the need to raise money from investorsA C C E L E R A T E T R A N S I T I O N T O A S U S T A I N A B L E F U T U R E• Tesla’s electric vehicles are catalyzing the transition to sustainable transportation • In the same way, more compelling solar energy systems will drive solar adoption and accelerate the transition to a sustainable future, with lower customer costs and greater energy security12 ? TESLA . C O M
SOLARCITY M A R K E T L E A D E R S H I PLEADERSHIP• SolarCity is the #1 provider of residential and commercial solar% O F S O L A R C I T Y M A R K E T S H A R E??Com m erc i al??Resident ial35% 33%25%17%14% 11% 8%7% 7% 7%6% 6%5% 3%2009 2010 2011 2012 2013 2014 2015Source: SolarCity Q2 2016 earnings presentationV E R T I C A L I N T E G R A T I O NModule Manufacturing• High-efficiency module manufacturing across multiple facilities while also nearing completion on a 1 GW manufacturing facility in BuffaloSales and Lead Generation• National sales organization, with a substantial direct sales forceFinancing• Innovative solar financing options help reduce SolarCity’s cost of capital and make solar energy more accessible and affordableInstallation• Comprehensive approach to system installation, from obtaining necessary building permits to arranging for interconnection to the power gridMonitoring• Proprietary monitoring systems, providing customers with a real-time view of their energy generation and consumption, ensuring continuing optimal system performanceINNOVATION• Highly differentiated technology portfolio??Leading solar cell and module technology that offers high module efficiency of 22%+??Efficient, attractive mounting systems, offering superior aesthetics, faster installation and lower cycle times• Low-cost energy supplier??Breadth of financing alternatives enables the lowest fully-installed cost in residential solar• Investment in nationwide infrastructure??Experienced nationwide sales and installation teams13 ? TESLA . C O M
A C Q U I S I T I O N I S T H E R I G H T S T R A T E G Y T O M A X I M I Z E S H A R E H O L D E R V A L U E• No duplication of roles– Tesla can leverage SolarCity’s existing installer network, customer support and service infrastructure, and solar engineering and construction capabilities– Remove duplication in sales and General & Administrative functions• Seamlessly integrated products– As separate entities, Tesla and SolarCity are each developing their own customer apps, Powerwall aggregation software, and Powerpack control algorithms. Post-acquisition, there will be a single engineering team working to develop a single suite of seamlessly integrated products Tesla can leverage SolarCity’s existing sales tools (e.g., customer savings calculator) to develop sophisticated tools for combined solar + storage offering• Perfect information flow– Combined company has full visibility into cost and product roadmap for solar + storage, and can pool technical/economic modelling skills, enabling aggressive bids into commercial & industrial (C&I) and utility projects– Can leverage this combined know-how globally, not just in SolarCity territory• Vertical Integration / No margin stacking– Residential, C&I and utility customers benefit from a single counterparty who is responsible for all system issues No margin stacking means combined company can offer customers a lower system price• $150mm of direct cost synergies expected to be achieved in first full year after closingHaw aii Case Study • First-of-its-kind utility scale solar + storage system providing reliable renewable energy that is readily and consistently available through storage• Tesla Powerpacks will store solar energy generated during daylight hours for later dispatch during evening (non-daylight) peak hours• Will feed up to 13 MW of electricity onto the grid to reduce peak demand• On track for substantial completion by the end of 2016• Developed by SolarCity in collaboration with Tesla. As a combined company, Tesla/SolarCity could have further optimized design, schedule and project economics to improve offering and increase margin14 ? TESLA . C O M
W H Y N O W ?C O N V E R G E N C E O F P R O D U C T R O A D M A P S• Tesla is planning an imminent launch of next generation Powerwall and Powerpack– Products will have increased energy capacity and be easier to install and integrate with solar systems• SolarCity is planning an imminent launch of new, improved solar panels and a solar roof with significantly improved efficiency and aesthetics– Tesla’s expertise in aesthetics and design enable rapid transition and seamless execution of new, improved panelsO N T H E T H R E S H O L D O F A M A R K E T E X P A N S I O N• Market dynamics suggest a forthcoming ramp up in solar adoptionImproved aesthetics of the solar roof will make the product much more desirable– Innovation and scale drives cost savings tipping point for customers• Huge market opportunity as five million US households replace roofs each yearS o l a r C i t y g e t t i n g r e a d y t o p r o d u c e h i g h l y d i f f e r e n t i a te d in t e g r a t ed s o la r r o o f s ys t e m sT e s l a ’ s n e xt—g e n e n e r g y s t o r a g e p r o d u c t s a r e r e a d y t o s c a l eG i g a f a c t or y o n t r a c k t o r a m p b a t t e r y p r o d u c t i o n15 ? TESLA . C O M
TESLA’S TRACK RECORD OF SUCCESS
18%
EV Market Leader
Over 160,000 Tesla vehicles delivered to date – grew market share(1) from 8% in 2013 to 18% in 2015
Volume production and deliveries of Model 3 scheduled for late 2017
Features include battery packs that achieve world’s longest highway range of 315 miles, vehicle
d f 0 t 60 h i d d 4G LTE t k d t d t f th i
MODEL S SHARE IN CURRENT
TESLA MARKETS GLOBALLY( 1 )
W O R L D ‘ S F A S T E S T
G R O W I N G C A R C O M P A N Y
8%
11%
2013 2014 2015
speeds of to mph in under 3 seconds, over a network and a steady stream of over-the-air
software updates
Has Built the World’s Largest High-Speed EV Charging Network
~715 high-speed supercharger charging stations in an expanding network spanning North America, Europe and Asia
Number of stations expected to greatly expand worldwide (1) Source: IHS Global Sales and Registrations, IHS Light Vehicle Forecast (Hong Kong), Tesla
(Tesla Deliveries)
Innovative Energy Storage Technology
Powerwall and Powerpack lithium-ion energy storage systems enable elegant and effective solar load shifting,
grid services, and backup power
Energy storage applications range from single homes to large utility-scale projects, such as the Southern California Edison Mira Loma substation
project, which, when complete, will be the world’s largest lithium ion battery storage plant
Offerings are differentiated by high efficiency, *Large Luxury Vehicle Market defined as: Tesla Model S, Audi A7/S7/RS7, Audi A8/S8, BMW
6-Series Gran Coupe, BMW 7- Series, Jaguar XJ/XJR, Lexus LS, Mercedes CLS-Class,
Mercedes S-Class, Porsche Panamera; excludes 2 door variants,
and estate/wagon body styles
complete system integration, compact footprint, and low cost
Gigafactory Progress
Expected to support the production of energy storage products and ~500,000 vehicles annually
Estimated to produce more lithium ion cells by 2018 than all of the world’s combined output in 2013
F A T E D
16 ¦ TESLA.COM
U L L Y V E R T I C A L L Y I N T E G R Design Manufacturing Sales Financing
C O N T I N U E D A B I L I T Y T O S U C C E S S F U L L Y E X E C U T E M U L T I P L E P R O J E C T S S I M U L T A N E O U S L Y• Q3 2016 was best quarter ever for Tesla for deliveries and production– Delivered ~24,500 vehicles, an increase of 70% from Q2 2016– Vehicle production rose to 25,185, an increase of 37% from Q2 2016• Gigafactory development is on track with Panasonic partnership• Continued, uninterrupted product innovation with several key product launches announced– All Tesla vehicles now produced have the hardware needed for full self-driving capability – New models such as Model S P100D with Ludicrous mode and Model X P100D with Ludicrous mode were launched– Model 3 development on track with volume production and deliveries scheduled for late 2017– Ongoing work on future Tesla vehicles• Sales, Service and Supercharger locations continue to expand worldwide Gigafactory o n t r a c k t o r a m p b a t t e r y p r o d u c t i o nM o d e l 3 d e l i v e r y s c h e d u l e d f o r l a t e 2 0 1 7F u l l y e q u i p p e d wit h h a r d wa r e f o r s e l f—d r i v i n g c a p a b i l i t y17 ? TESLA . C O M
R O A D M A P F O R S U C C E S S F U L I N T E G R A T I O N• Joint integration team from both Tesla and SolarCity led by corporate development and human resources• Priority in the near-term is business continuity for both companies• Over the course of 2017 the combined company will transition to operate as one company under Tesla name• Tesla will have 3 products sold and marketed under the Tesla brand –Autos, Batteries, and Solar• All employees will be Tesla employees supporting Tesla’s three products• Employees will be focused together to drive growth in three products and develop joint product offerings• Shared vision – Tesla brand and global reach will accelerate ability to realize vision of sustainable energy future18 ? TESLA . C O M
R E C E N T T E S L A / P A N A S O N I C P A R T N E R S H I P A N N O U N C E M E N TA N N O U N C E M E N T O V E R V I E W• Blending best from Tesla, SolarCity & Panasonic in PV cell technology & manufacturing processes• Entered into a non-binding letter of intent on October 16, 2016 to collaborate on photovoltaic cell and module production in Buffalo, New York– Contingent upon shareholders’ approval of Tesla’s acquisition of SolarCity, Tesla will use the cells and modules in a solar energy system that will work seamlessly with Tesla’s energy storage products (Powerwall and Powerpack)– Panasonic expected to begin PV cell and module production at the Buffalo facility in 2017– Tesla intends to provide a long-term purchase commitment for those cells from Panasonic– The collaboration extends the established relationship between Tesla and Panasonic, which includes the production of electric vehicles and energy storage battery cellsS I G N I F I C A N T B E N E F I T S F O R T E S L APartnership benefits include: – Accelerated product development• Partnership enables accelerated production of high-efficiency, reliable solar cells and modules at the best cost– Technical expertise• Enables Tesla to leverage Panasonic’s 30+ year experience in manufacturing solar panels and its valuable manufacturing expertise• Combines the best cell component technology from both companies and integrates them into the new solar modules that will be produced in Buffalo– Credibility• Partnering with market leader such as Panasonic signals the value proposition and capabilities of the production facility19 ? TESLA . C O M
I I . FINANCING AND LIQUIDITY20 ? TESLA.COM
COMPLEMENTING STRONG BALANCE SHEETWITH RETAIL AND PROJECT FINANCING CAPABILITIES• We expect SolarCity to reach cash flow breakeven with cost and revenue synergies and Tesla’sprudent capital and operating expense management• SolarCity and Tesla successfully access the capital markets for two distinct reasons:1 2C O R P O R A T E D E B T A N DE A N DP R O J E C T F I N A N C I N G A N D R E T A I L F I N A N C EQ U I T Y T O E X P P R O D U C T S A S S O U R C E S O F C A P I T A L F B U S I N E S S O P E R A T I O N SO RC U S T O M E R S• Tesla’s equity rounds since 2012 used toexpand product offering• Sound liquidity and corporate debt positions,• SolarCity engages in project financing topull forward cash from solar installationsand redeploy capital for new customers• Tesla partners with a global network offinancial institutions to provide attractiveretail financing sources for vehiclebolstered by recent pay down of near-term purchasesConvertible Notes• 3x expansion of cash and available liquidity onTesla’s balance sheet during 2016?? Three new funds created in the last 90 days to enable almost $1.0bn in solar projects, demonstrate SolarCity’s diversified pool of institutional investors??With rollout of new loan offering inQ2 2016, cash and loan purchases??$1.6bn lease capacity in NorthAmerica alone with existing and newleasing partners, as well as successof loan products launched in May ‘16??$300mm asset-based retail lease21 ? TESLA.COMQ , pto represent 30% of salesfacility executed in the 3rd quarter tomonetize direct leases
SIGNIFICANT COST AND REVENUE SYNERGIES• Leverage Tesla’s footprint to drive solar sales leads and consumer trust• Increase solar leads from foot traffic in Tesla stores – customers haveC O S T S Y N E R G I E S R E V E N U E S Y N E R G I E S• $150mm of direct cost synergies expected to be achieved in first fullyear after closingoverlapping product interest• Global reach of Tesla’s 190+ stores and brand as solar product expandsinternationally• Simplifying the install process for vehicle charging, solar and storageproducts• Cost synergies driven by:??Sales and marketing efficiencies enabled through cross-selling??Significant corporate and overhead savings• Additional potential cost savings:??Lowering hardware TCO)• Single ordering experience, installation and service contactcosts and total cost of ownership (??Reducing installation and service costs??Improving manufacturing efficiency??Reducing customer acquisition costs through combined sales channels??Optimizing capital expenditure costs“There are likely cost synergies due to operating overlaps…Management hasnoted $150 million in synergies, which we think is easily achievable“22 ? TESLA.COM
TESLA CONTINUES TO TACTICALLY ACCESSCAPITAL MARKETS FOR C O R P O R A T E F I N A N C I N G C A P A B I L I T I E SCORPORATE FINANCING$1.7bn+ liquidityS T R O N G L I Q U I D I T Y P O S I T I O N$205mm$920mm $1.4bnEquityDebtAvailable Liquidity$1.1bn$750mm+ $750mm liquidity$550mm $2.3bn$0.8bn$3.2bn+ $300mm avail. liquidityConvertible Debt MaturitiesEquity Follow-On• History of successful execution, most recently with a ~$1.7bn equity offering toIPO-2012 2013 2014 2015 Year-to-Date Q2’16Cash and Liquidity2018 2019 2021Liquidity and Liability Management• y , y $ q y g Year-to-date Tesla has prudently managed to a >$3.0bn+ liquidity positionaccelerate the production ramp of the Model 3– Timing for capital needs of the development of Model 3 mass market vehicle andTesla GigafactoryCorporate Debt• Successfully diversified capital structure and expanded available liquidityp y g $ q yp– ~$1.0bn of available committed sources of liquidity for working capital purposes– $300mm retail lease financing redeployed for new customers in addition to globalpartnerships with lease providers• De-levered profile of the business with >$450mm of conversion requests received yearto-date, reducing the aggregate principal of 2018 maturities to $205mm23 ? TESLA.COM– $3.0bn issued in convertible markets and expanding $1.3bn in committed assetbasedfinancing from money center banks
SOLARCITY TO ALIGN FUTURE GROWTHWITH A SELF-FUNDED MODEL$8.05bnF O C U S O N R E V E N U E S T H A TT R A N S L A T E I N T O F R E E C A S H F L O W SS E L F—F U N D E D P R O J E C T F I N A N C I N GE X P A N D S C O R P O R A T E C A P I T A L S T R U C T U R E$1.4bn$5.2bn$0.7bn ABS debt+ $1.1bn project leveldebt $0.7bn85% serviced$3.4bn70% already serviced?Retail Solar Bonds??Convertible debtProject FinancingSolar Assets Cash Flow Generation Q2’16 Capital Structure Secured Asset-Based Debt Other Project Financing Non-Controlling Funds??Equity raised• Ability to successfully generate excess cash flow from operations:– >$5bn solar assets deployed as of Q2 2016, to generate ~$8bn incustomer cash flows over the life of the contracts• Best in class project financing capabilities for contracted assets such as customer leases and powerpurchase agreements (PPA)– Discrete financing structures created with and for institutional investors purchasing future cash• Accelerating sales via cash purchase and retail loans (launched lateQ2’16)– 5x increase in cash/loan sales vs. leases in recent quarter withmultiple financing partners to scale the loan business– Addresses GAAP losses due to timing mismatch forrecognition of costs and revenuesg p gflows, tax benefits or both• Any leverage used by these fund structures is non-recourse debt to the company and paid back bythe contracted customer payments — 50%+ of SolarCity debt is non-recourse• Proven track record of ability to raise capital for solar systems installations f C S O 2016 30024 ? TESLA.COMg– Complements ability to monetize customer Power PurchaseAgreements (PPA) and leases through project financing– Recently created two funds, one with Citi and one with Credit Suisse to finance over 347mm in solar projects for homeowners and small businesses respectively – Additionally in September 2016, raised $305mm in a cash equity transaction with QuantumStrategic Partners
I I I . GOVERNANCE AND PROCESS25 ? TESLA.COM
BOARD PROCESST E S L A B O A R D R E V I E W S S T R A T E G I C O P P O R T U N I T I E S I N T H E O R D I N A R Y C O U R S E• Tesla Board explored options to create a more vertically integrated sustainable energy company– Expediting the transition to a solar-electric economy has been long-time element of Tesla’s strategic plan• Tesla Board performed a thorough, comprehensive review of potential solar industry targets with the assistance of independent advisors• Following this review, the Tesla Board concluded that SolarCity was the most attractive asset for Tesla in the solar energy industryR O B U S T P R O C E S S A D V I S E D B Y I N D E P E N D E N T A D V I S O R S• Tesla engaged independent financial advisor (Evercore) and outside legal counsel (Wachtell Lipton)• Elon Musk and Antonio Gracias recused themselves from any vote by the Tesla Board on matters relating to the transactionT E S L A B O A R D C O N D U C T E D T H O R O U G H D E L I B E R A T I O N O V E R T H E C O U R S E O F M A N Y M E E T I N G S• Tesla Board met with its external advisors numerous times throughout the process, including 8 special meetings over the course of two months• Tesla Board carefully evaluated the transaction from various perspectives and reviewed extensive due diligence, including from its independent financial advisorand outside legal counselT R A N S A C T I O N T E R M S A R R I V E D A T V I A A R M ’ S L E N G T H N E G O T I A T I O N SA P P R O V A L P R O C E S S• Exchange ratio determined based on the totality of due diligence review of SolarCity, including new information discovered during diligence• Tesla Board – with Elon Musk and Antonio Gracias recusing themselves – rejected two counterproposals from SolarCity and ultimately settled on anexchange ratio below the initial offer• Tesla Board – with Elon Musk and Antonio Gracias recusing themselves – unanimously approved the transactionTransaction must be approved by a majority of the votes cast by unaffiliated Tesla shareholders26 ? TESLA.COM
THE BOARD AND MANAGEMENT TEAM CONDUCTED A THOROUGHPROCESS OVER THE COURSE OF MANY MEETINGS• May 31, 2016: Tesla Board discussed the possible benefits and detriments of acquiring a solar energy company in the context of Tesla’s existing strategicplan, and instructed Tesla management to assess the potential acquisition of a solar energy company• June 5 – June 20, 2016: Tesla Board performed a thorough, comprehensive review of potential solar industry targets with the assistance of independentadvisors• June 20, 2016: Tesla Board met to discuss strategic alternatives, including a potential acquisition of a solar energy company. The Board ultimately decidedto move forward with an initial offer to acquire SolarCity in an all-stock transaction at an exchange ratio of 0.122x—0.131x• June 26, 2016: SolarCity granted Tesla and its advisors access to an electronic data room; Tesla and its advisors began participating in numerous duediligence sessions regarding, among other things, business, legal, financial and regulatory matters• July 13, 2016: SolarCity proposed having consideration based on a fixed value per share, inclusion of a go-shop provision and a lower termination fee andrequested that Tesla consider providing short-term financing during the pendency of a merger. Tesla agreed to a customary go-shop provision with a reducedtermination fee but required SolarCity to obtain financing from a third party during the pendency of a merger• July 19, 2016: Tesla Board met to review diligence findings, including with respect to SolarCity’s financing needs, and instructed its advisors to reject theSolarCity Special Committee’s proposal that the acquisition consideration be based on a fixed value per share• July 22, 2016: Tesla Board met to review diligence findings and updated perspectives on valuation• July 23, 2016: SolarCity delivered a counterproposal of a fixed exchange ratio of 0.136x• July 24, 2016: Tesla Board met to review diligence updates and discuss valuation, including the July 23rd counterproposal. Following discussion, the TeslaBoard rejected the July 23rd counterproposal and authorized a revised proposal to acquire SolarCity at an exchange ratio of 0.105x• July 26, 2016: SolarCity communicated a revised counterproposal at an exchange ratio of 0.1265x• July 27, 2016: Tesla Board met to review diligence updates and discuss valuation, including the July 26th counterproposal. The Tesla Board rejected the July26th counterproposal and agreed to a revised proposal at an exchange ratio of 0.110x, to which SolarCity agreed• July 30, 2016: The Tesla Board approved the proposed merger• July 31 agreement was 27 ? TESLA.COM• August 1, 2016: Tesla and SolarCity announced that they entered into a merger agreement
INVESTOR OUTREACHTesla management and independent directors have activelyengaged with investors• Tesla conducted comprehensive investor outreach,including extensive conversations with toph h lde gaged es o sshareholders• Tesla’s discussions with investors have helpedthem better understand the strategic rationale,capital structure of SolarCity and processOVERNUMEROUSDISCUSSIONS• The vast majority of Tesla’s large institutionalinvestors understand the strategic rationale of thecombination and how it accelerates Tesla’s longtermstrategyT l ti t ti l ith itWITH TESLA’S LARGESTSHAREHOLDERS28 ? TESLA.COM• Tesla continues to actively engage with itsshareholder base
POSITIVE INVESTOR AND MARKET SENTIMENTTesla isn’t just a car company looking to buy asolar company. It’s also a battery company thatwants to link its two biggest markets: energyOf greater importance, Musk has a marketadvantage that his competitors arguably don’t:Tesla itself. The carmaker is in the process ofmanufacture what But the more we researched this, the moresense it made to combine Tesla with solarpanels. We believe they can make betterproducts efficiently There are likely cost synergies due to operatingoverlaps…Management has noted $150million in synergies, which we think is easilyachievablesupply (solar) with energy demand (electriccars). Cheap and efficient batteries are whatmake Tesla cars possible, and they have thepotential to change the economics of solar,too.News June 29 constructing a factory to itthinks will be the most advanced battery yet.The advantages of this battery are plainlyevident for Tesla cars reliant on batterypower, but the perceived synergies of suchan advance extend to Solar City.products, make them more efficiently, andrealize tremendous savings by selling thetwo products together.Ronald Baron, Founder, Baron Capital,August 4, 2016Cowen, September 8, 2016Bloomberg News, 29, 2016TSLA retail stores offer SCTY the ability tosignificantly reduce customer acquisitionsituation…[and]Forbes, August 8, 2016The combination of Tesla Motors and SolarCityis inevitable, offers attractive financial returns toIf so inclined, you could provide for all of yourenergy needs without ever leaving the TeslaForget the economies of which areThe proposed merger [brings] a widelyrecognized brand to the solar industry whichcosts and improve cash flow drive greater customer the ramp of differentiated solar plus storageproducts as well as battery packs…FromTSLA’s standpoint, the acquisition makesexecution on the Powerwall side much easierand not hardershareholders of both companies, and creates arenewable energy leader that is uniquelypositioned to catalyze a transformation of theenergy and transportation industries.Avondale Partners, June 28, 2016family. scale (significant), that’s just powerful branding. Andadding batteries to solar is about to becomeincreasingly common, according to a recentanalysis by Bloomberg New Energy Finance.News June 21 could acceptance ofroof-top solar…SCTY can reduce customeracquisition cost by leveraging TSLA’s retailsales network and brand recognition…There isnothing in the solar industry with brandawareness even approaching TSLA’s29 ? TESLA.COMDeutsche Bank, June 22, 2016Bloomberg News, 21, 2016
Barclays, June 22, 2016
I V . CONCLUSION30 ? TESLA.COM
A HIGHLY COMPLEMENTARY, STRATEGIC COMBINATIONS T R A T E G I C C O M B I N A T I O N C R E A T E S T H E WOR L D ’ S O N L Y I N T E G R A T E D S U S T A I N A B L EENERGY COMPANY• Creates a vertically integrated energy company offering end-to-end clean energy products• With a Model S, Model X, or Model 3, a solar panel system, and a Powerwall, consumers can deploy and consume energy in an efficient and sustainable way, loweringcosts and minimizing dependence on fossil fuels and the utility gridEXPANDS ADDRESSAB L E M A R K E T• Expands Tesla’s total addressable market to include the solar market, a $12bn(1) market in the US alone that is expected to grow at a compounded annual growth rate of15% and 20% in the next 5 years• Huge opportunity in roof market as five million US households replace roofs each year• Customers of the two companies have shared ideals and benefit from the combined offerings of solar products, energy storage and electric vehiclesL E V E R A G E S C O R E COMPETENC I E S O F E A C H COMPANY• Tesla’s experience in design, engineering, and manufacturing will help to advance solar panel technology, including by making solar panels more aesthetically pleasing• Combination enables Tesla to provide the best possible installation service for Powerwalls and charging systems by utilizing SolarCity’s best-in-class installation team andalso allows Tesla to leverage SolarCity’s expertise in offering customer-friendly financing productsS U B S T A N T I A L C O S T E F F I C I E N C I E S A N D R E V E N U E S Y N E R G I E S• $150mm of direct cost synergies expected in the first full year after closing, driven by sales & marketing efficiencies and corporate & overhead savings• Leverage Gigafactory’s global scale battery cell production facility for reduced production costs• Drive revenue synergies through simplifying access to sustainable energy products and leveraging complementary channel strengthsG R E A T C U L T U R A L F I T31 ? TESLA.COM• Shared mission of sustainability, innovation and overcoming challenges that stand in the way of progress toward these goals(1) Value of new US residential and commercial and industrial solar installations
APPENDIX32 ? TESLA.COM
TESLA OVERVIEW• Leading vertically integrated provider of high-performance fully electric vehicles and energystorage productsD i d hi l i i biliti bi d ith t h i l d t f t i t id t ithTesla FactsNASDAQ: TSLA– Design and vehicle engineering capabilities, combined with technical advancements of powertrain system, provide customers withlong range and recharging flexibility; high-performance without compromised design or functionality; and energy efficiency andattractive cost of ownership– Established network of vehicle sales and service centers and Supercharger stations globally– Building battery manufacturing facility – Gigafactory – to integrate battery material, cell, module and battery pack production in onelocation for use in electric vehicles • Founded: 2003• Based: Palo Alto, CA• Employees: 13,058*and energy storage applications• Mission: Accelerate the• Electric vehicles– Planned production model: Model 3 (mass-market affordable vehicle) with volume production and deliveries scheduled for late 2017– Current production models: Model S (luxury sedan) and Model X (crossover/SUV)world’s transition tosustainable energy• 2015 Revenue: $4bn(GAAP)• Market cap: ~ $29.9bn**• Energy storage products– Leveraged vehicles’ energy management technologies and manufacturing processes to develop energy storage products for use inhomes, commercial sites and utilities– Began production and deliveries of energy storage products – 6.4 kWh Powerwall for residential applications and 100 kWhPowerpack for commercial and industrial applications – in Q3 2015• Retail locations: >190*As of 12/31/15**As of 10/20/1633 ? TESLA.COM
SOLARCITY OVERVIEW• America’s #1 installer of residential and commercial solar; provides homeowners, businesses andgovernment organizations with solar energy as a serviceF ll ti ll i t t d h l fi i i i f t i i t ll ti it i d i tSolarCity FactsNASDAQ: SCTY– Fully vertically integrated approach: sales, financing, engineering, manufacturing, installation, monitoring and maintenance– Leveraging differentiated technology and significant scale to drive down the cost of solar energy to an affordable level for more and morepeople across the US and, eventually, the world– Focus on technology-based solutions to build a cleaner, more affordable, more resilient energy distribution grid• 2006 285 000 • Founded: 2006• Based: San Mateo, CA• Employees: ~ 12,000*• Mission: SpeedSince 2006, installed solar energy systems for over 285,000 customers– More than 100,000 new installations in 2015– Deployed 778 megawatts and installed 870 megawatts in 2015• Primary solar offerings:widespread adoption ofsolar power by offeringproducts that save ourcustomers money• 2015 Revenue: ~ $400mm– Residential and commercial: SolarLease (lease panels to customer); SolarPPA (install panels and customer pays for energy produced);MyPower (loan to purchase panels); upfront purchase (includes federal tax benefit); PowerGuide (monitoring solution)– Utility and grid services: Utility-Scale Solar (solar power plants); Distributed Energy Solutions (work with grid operators to createincreased flexibility and resiliency); Dispatchable Utility-Scale Energy Storage (use storage solutions to manage peak load and capacity)• channels include force door-to-door sales centers • Market cap: ~ $2bn***As of 12/31/15**As of 10/20/1634 ? TESLA.COMDistribution direct outside sales force, door to sales, call centers, channelpartner network (e.g., Home Depot and Best Buy) and customer referral program
BIOS OF PRESENTERSElon Musk has served as Tesla’s Chief Executive Officer since October 2008 and as Chairman ofTesla’s Board of Directors since April 2004. Mr. Musk has also served as Chief Executive Officer,E L O N M U S KIndependent Director Chairman and Chief Executive OfficerR O B Y N D E N H O L MRobyn M. Denholm has served on Tesla’s Board of Directors since 2014. She also serves on ABBLtd.’s Board and has previously served on Echelon Corporation’s Board from 2008 to December 2013 pChief Technology Officer and Chairman of Space Exploration Technologies Corporation, a companywhich is developing and launching advanced rockets for satellite and eventually human transportation(“SpaceX”), since May 2002, and as Chairman of SolarCity Corporation, a solar installation company(“SolarCity”), since July 2006.Prior to SpaceX, Mr. Musk co-founded PayPal, an electronic payment system, which was acquired byeBay in October 2002, and Zip2 Corporation, a provider of Internet enterprise software and services,which was acquired by Compaq in March 1999. Mr. Musk holds a B.A. in physics from the UniversityB S Pennsylvaniap y p– on both company’s boards, she served as an independent board member and as a member of theAudit Committee. From July 2013 until February 2016, Ms. Denholm served as Executive VicePresident and Chief Financial and Operations Officer of Juniper, which she had joined in August 2007as Executive Vice President and Chief Financial Officer. In these roles she helped Juniper achieverecord revenues while delivering breakthrough innovations to customers.Prior to joining Juniper, Ms. Denholm served in various executive roles at Sun Microsystems fromJanuary 1996 to August 2007, including Senior Vice President of Corporate Strategic Planning,Senior Vice President of Finance, and Vice President and Corporate Controller (Chief Accounting of Pennsylvania and a B.S. in business from the Wharton School of the University of Pennsylvania.Officer). She also served at Toyota Motor Corporation Australia for seven years and at ArthurAndersen & Company for five years in various finance assignments.Ms. Denholm is a Fellow of the Institute of Chartered Accountants of Australia and holds a Bachelor’sdegree in Economics from the University of Sydney and a Master’s degree in Commerce from theUniversity of New South Wales.In 2011, Ms. Denholm was a Bay Area CFO of the Year finalist and she was recently named onJournal’s Women of Influence ListTODD MARONGeneral Counsel and Corporate SecretaryJ A S O N W H E E L ERChief Financial OfficerSilicon Valley Business Journal s List.Jason Wheeler has served as Tesla’s Chief Financial Officer since November 2015.Prior to joining Tesla, Mr. Wheeler served as Vice President of Finance at Google, where he hadTodd Maron has served as Tesla’s General Counsel since September 2014, having previouslyworked as Tesla’s Deputy General Counsel since September 2013.35 ? TESLA.COMworked for over 13 years. He has also worked at Booz Allen Hamilton as an associate and at HewlettPackard as a senior financial analyst. He holds a bachelor’s degree in finance, summa cum laude,from Colorado State University and an MBA from Harvard Business School.Prior to joining Tesla, Todd was a partner at Jaffe and Clemens and prior to that was an associate atIrell & Manella. Todd is a member of the Los Angeles Center for Law and Justice’s Board ofDirectors, and holds a BA with honors from the University of Michigan and a JD from the New YorkUniversity School of Law.