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Summarize-SEC-Filings-with-OpenAI-GPT3.ipynb
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| { | |
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| "nbformat_minor": 0, | |
| "metadata": { | |
| "colab": { | |
| "provenance": [], | |
| "authorship_tag": "ABX9TyMR3ZVpgf/x0ddpS75H19h4", | |
| "include_colab_link": true | |
| }, | |
| "kernelspec": { | |
| "name": "python3", | |
| "display_name": "Python 3" | |
| }, | |
| "language_info": { | |
| "name": "python" | |
| } | |
| }, | |
| "cells": [ | |
| { | |
| "cell_type": "markdown", | |
| "metadata": { | |
| "id": "view-in-github", | |
| "colab_type": "text" | |
| }, | |
| "source": [ | |
| "<a href=\"https://colab.research.google.com/gist/janlukasschroeder/cadd36edd13f1b3420cc63814907a65d/summarize-sec-filings-with-openai-gpt3.ipynb\" target=\"_parent\"><img src=\"https://colab.research.google.com/assets/colab-badge.svg\" alt=\"Open In Colab\"/></a>" | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# Summarize SEC Filings with OpenAI GPT3\n", | |
| "\n", | |
| "In this tutorial, I show you how to develop an application that summarizes sections from 10-Q and 10-K SEC filings using OpenAI’s GPT3 in Python. Specifically, the app summarizes the risk factor section of named filings in less than 30 lines of code.\n", | |
| "\n", | |
| "For this tutorial, you don’t need any knowledge about Natural Language Processing or the inner workings of GPT3. A basic understanding of Python is already sufficient.\n", | |
| "\n", | |
| "Given the complex structure of 10-Q and 10-K SEC filings, we make our life easier by utilizing the [Extractor API](https://sec-api.io/docs/sec-filings-item-extraction-api) from [sec-api.io](https://sec-api.io/) to help us extract sections from SEC filings. This way we don’t have to develop a section extractor from scratch and instead just request the item of interest with a simple API call.\n", | |
| "\n" | |
| ], | |
| "metadata": { | |
| "id": "T27bASva0ElX" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# TLDR Implementation\n", | |
| "\n", | |
| "The following shows a high-level implementation that extracts and summarizes Item 1A, Risk Factors from Tesla’s 10-K filing filed in 2020, in 15 sentences.\n", | |
| "\n", | |
| "```python\n", | |
| "import openai\n", | |
| "from sec_api import ExtractorApi\n", | |
| "\n", | |
| "openai.api_key = \"YOUR_API_KEY\"\n", | |
| "extractorApi = ExtractorApi(\"YOUR_API_KEY\")\n", | |
| "\n", | |
| "filing_url = \"https://www.sec.gov/Archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm\"\n", | |
| "\n", | |
| "section_text = extractorApi.get_section(\n", | |
| " filing_url, \n", | |
| " item=\"1A\", \n", | |
| " type=\"text\"\n", | |
| ")\n", | |
| "\n", | |
| "prompt = f\"Summarize the following text in 15 sentencens:\\n{section_text}\"\n", | |
| "\n", | |
| "response = openai.Completion.create(\n", | |
| " engine=\"text-davinci-003\", \n", | |
| " prompt=prompt\n", | |
| ")\n", | |
| "\n", | |
| "print(response[\"choices\"][0][\"text\"])\n", | |
| "```" | |
| ], | |
| "metadata": { | |
| "id": "MJP443e10RSg" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# Getting Started\n", | |
| "\n", | |
| "Let’s start with installing the `openai` Python package.\n" | |
| ], | |
| "metadata": { | |
| "id": "lg0i4nBP0Ymw" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "execution_count": null, | |
| "metadata": { | |
| "id": "AVclqq7Xh0CD" | |
| }, | |
| "outputs": [], | |
| "source": [ | |
| "!pip install openai -q" | |
| ] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "import openai" | |
| ], | |
| "metadata": { | |
| "id": "rJEJzyUaioki" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "A free API key is available on OpenAI’s website (https://beta.openai.com/account/api-key)" | |
| ], | |
| "metadata": { | |
| "id": "XPlD8_Y20c8_" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "" | |
| ], | |
| "metadata": { | |
| "id": "AkC2-Tiy0g6I" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Next, import and set your API key." | |
| ], | |
| "metadata": { | |
| "id": "lgbSYY400lr0" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "from getpass import getpass\n", | |
| "openai.api_key = getpass()" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/" | |
| }, | |
| "id": "gAYYEaXRjDTM", | |
| "outputId": "010eb289-3fa9-48b7-82ee-ca08b9462eaa" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "name": "stdout", | |
| "output_type": "stream", | |
| "text": [ | |
| "··········\n" | |
| ] | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "GPT3 (just “GPT” in the following) is a prompt-based AI that requires us to tell it (in words) what we want it to do by sending it our request, e.g. a question it should answer or a task it should perform, such as “summarize the following: …”. If you are new to GPT and like to know more, have a look at the [official introduction from OpenAI here](https://beta.openai.com/docs/introduction).\n", | |
| "\n", | |
| "For example, we can ask GPT who the greatest investor of all time is in just three lines of code." | |
| ], | |
| "metadata": { | |
| "id": "PHvOh6dg0n8P" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "prompt = \"Who is the greatest investor of all time?\"\n", | |
| "\n", | |
| "engine = \"text-davinci-003\"\n", | |
| "\n", | |
| "response = openai.Completion.create(\n", | |
| " engine=engine, \n", | |
| " prompt=prompt\n", | |
| ")\n", | |
| "\n", | |
| "response" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/" | |
| }, | |
| "id": "kFRmTF_IjDnE", | |
| "outputId": "72940e1f-7e43-4142-f5d4-d662ce038489" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "execute_result", | |
| "data": { | |
| "text/plain": [ | |
| "<OpenAIObject text_completion id=cmpl-6SLSlPubay0yWtqYE4Qq6igKSSuhJ at 0x7fcf8764ca90> JSON: {\n", | |
| " \"choices\": [\n", | |
| " {\n", | |
| " \"finish_reason\": \"stop\",\n", | |
| " \"index\": 0,\n", | |
| " \"logprobs\": null,\n", | |
| " \"text\": \"\\nThe greatest investor of all time is widely considered to be Warren Buffett.\"\n", | |
| " }\n", | |
| " ],\n", | |
| " \"created\": 1672213707,\n", | |
| " \"id\": \"cmpl-6SLSlPubay0yWtqYE4Qq6igKSSuhJ\",\n", | |
| " \"model\": \"text-davinci-003\",\n", | |
| " \"object\": \"text_completion\",\n", | |
| " \"usage\": {\n", | |
| " \"completion_tokens\": 15,\n", | |
| " \"prompt_tokens\": 66,\n", | |
| " \"total_tokens\": 81\n", | |
| " }\n", | |
| "}" | |
| ] | |
| }, | |
| "metadata": {}, | |
| "execution_count": 4 | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "At first sight, GPT’s response seems a bit cryptic, but stay with me. The actual text response to our question sits in the `text` key inside the `choices` list." | |
| ], | |
| "metadata": { | |
| "id": "VydlnrXe0wzm" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# Language Models\n", | |
| "\n", | |
| "Our example above used the `text-davinci-003` engine, or in other words, the Davinci language model. Think of a language model as the level of IQ and understanding of the world that GPT has. The larger the model, the better GPT understands what we want it to do and the better its responses will be. A model is like the skill programs that Neo and Morpheus uploaded into their brains in The Matrix.\n", | |
| "\n", | |
| "OpenAI offers four different models: Ada, Babbage, Curie, Davinci. Davinci represents the largest model, i.e. GPT shows the highest IQ and understanding of our world when using this model. On the other spectrum lives the Ada model, pretty fast, but also not the sharpest tool in the shed. If you plan to summarize Gigabytes of text after you completed this tutorial, remember that Davinci can become pretty expensive quite quickly by paying $0.02 for 1K tokens (or 750 words). For the purpose of this tutorial, you can safely assume costs no greater than a small coup of coffee." | |
| ], | |
| "metadata": { | |
| "id": "ubYGDa7s01lz" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "" | |
| ], | |
| "metadata": { | |
| "id": "JKMTn1V-05y7" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "If you are interested in comparing the summarization skills of the models, simply change the `engine` parameter appropriately. Given the complexity of financial texts in SEC filings, we continue with the Davinci model." | |
| ], | |
| "metadata": { | |
| "id": "ELWnV2fu09nY" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# Extracting Sections from SEC Filings\n", | |
| "\n", | |
| "In order to extract text sections from SEC 10-Q and 10-K filings, we use the [Extractor API](https://sec-api.io/docs/sec-filings-item-extraction-api) offered by [sec-api.io](https://sec-api.io/). The Extractor API accepts three parameters and returns the extracted filing section as HTML or cleaned text:\n", | |
| "\n", | |
| "- URL of any 10-Q, 10-K and 8-K filing\n", | |
| "- Section name to be extracted, e.g. Item 1A Risk Factors\n", | |
| "- Return type: HTML or raw text without HTML/XBRL/CSS\n", | |
| "\n", | |
| "A free API key is available here: https://sec-api.io/signup/free\n", | |
| "\n", | |
| "We start with installing the `sec-api` Python package.\n", | |
| "\n" | |
| ], | |
| "metadata": { | |
| "id": "_OT-uvcS1BHP" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "!pip install sec-api" | |
| ], | |
| "metadata": { | |
| "id": "QkjNq43w0xSR" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Extracting the Risk Factor section in Item 1A of a 10-K SEC Filing is as simple as running the following four lines of code. The `extractorApi.get_section()` method returns a string with the extracted section as cleaned and standardized text." | |
| ], | |
| "metadata": { | |
| "id": "-tfY62zp1UAB" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "from sec_api import ExtractorApi\n", | |
| "\n", | |
| "extractorApi = ExtractorApi(\"YOUR_API_KEY\")" | |
| ], | |
| "metadata": { | |
| "id": "gSPUsUEZ0z-h" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "filing_url = \"https://www.sec.gov/Archives/edgar/data/1318605/000156459021004599/tsla-10k_20201231.htm\"\n", | |
| "\n", | |
| "section_text = extractorApi.get_section(filing_url, \"1A\", \"text\")\n", | |
| "\n", | |
| "section_text" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/", | |
| "height": 164 | |
| }, | |
| "id": "K7FeHt8RjP-a", | |
| "outputId": "9a80d982-87e7-4e1a-d4e4-31341ce88f9c" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "execute_result", | |
| "data": { | |
| "text/plain": [ | |
| "' ITEM 1A. RISK FACTORS\\n\\nYou should carefully consider the risks described below together with the other information set forth in this report, which could materially affect our business, financial condition and future results. The risks described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results. \\n\\nRisks Related to Our Ability to Grow Our Business\\n\\nWe may be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic.\\n\\nSince the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic. Government regulations and shifting social behaviors have limited or closed non-essential transportation, government functions, business activities and person-to-person interactions. In some cases, the relaxation of such trends has recently been followed by actual or contemplated returns to stringent restrictions on gatherings or commerce, including in parts of the U.S. and a number of areas in Europe. \\n\\nWe temporarily suspended operations at each of our manufacturing facilities worldwide for a part of the first half of 2020. Some of our suppliers and partners also experienced temporary suspensions before resuming, including Panasonic, which manufactures battery cells for our products at our Gigafactory Nevada. We also instituted temporary employee furloughs and compensation reductions while our U.S. operations were scaled back. Reduced operations or closures at motor vehicle departments, vehicle auction houses and municipal and utility company inspectors have resulted in challenges in or postponements for our new vehicle deliveries, used vehicle sales and energy product deployments. Global trade conditions and consumer trends may further adversely impact us and our industries. For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts. Similarly, increased demand for personal electronics has created a shortfall of microchip supply, and it is yet unknown how we may be impacted. Sustaining our production trajectory will require the readiness and solvency of our suppliers and vendors, a stable and motivated production workforce and ongoing government cooperation, including for travel and visa allowances. The contingencies inherent in the construction of and ramp at new facilities such as Gigafactory Shanghai, Gigafactory Berlin and Gigafactory Texas may be exacerbated by these challenges.\\n\\nWe cannot predict the duration or direction of current global trends, the sustained impact of which is largely unknown, is rapidly evolving and has varied across geographic regions. Ultimately, we continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly. If current global market conditions continue or worsen, or if we cannot or do not maintain operations at a scope that is commensurate with such conditions or are later required to or choose to suspend such operations again, our business, prospects, financial condition and operating results may be harmed.\\n\\nWe may experience delays in launching and ramping the production of our products and features, or we may be unable to control our manufacturing costs.\\n\\nWe have previously experienced and may in the future experience launch and production ramp delays for new products and features. For example, we encountered unanticipated supplier issues that led to delays during the ramp of Model X and experienced challenges with a supplier and with ramping full automation for certain of our initial Model 3 manufacturing processes. In addition, we may introduce in the future new or unique manufacturing processes and design features for our products. There is no guarantee that we will be able to successfully and timely introduce and scale such processes or features. \\n\\nIn particular, our future business depends in large part on increasing the production of mass-market vehicles including Model 3 and Model Y, which we are planning to achieve through multiple factories worldwide. We have relatively limited experience to date in manufacturing Model 3 and Model Y at high volumes and even less experience building and ramping vehicle production lines across multiple factories in different geographies. In order to be successful, we will need to implement, maintain and ramp efficient and cost-effective manufacturing capabilities, processes and supply chains and achieve the design tolerances, high quality and output rates we have planned at our manufacturing facilities in California, Nevada, Texas, China and Germany. We will also need to hire, train and compensate skilled employees to operate these facilities. Bottlenecks and other unexpected challenges such as those we experienced in the past may arise during our production ramps, and we must address them promptly while continuing to improve manufacturing processes and reducing costs. If we are not successful in achieving these goals, we could face delays in establishing and/or sustaining our Model 3 and Model Y ramps or be unable to meet our related cost and profitability targets. \\n\\nWe may also experience similar future delays in launching and/or ramping production of our energy storage products and Solar Roof; new product versions or variants; new vehicles such as Tesla Semi, Cybertruck and the new Tesla Roadster; and future features and services such as new Autopilot or FSD features and the autonomous Tesla ride-hailing network. Likewise, we may encounter delays with the design, construction and regulatory or other approvals necessary to build and bring online future manufacturing facilities and products. \\n\\n \\n\\nAny delay or other complication in ramping the production of our current products or the development, manufacture, launch and production ramp of our future products, features and services, or in doing so cost-effectively and with high quality, may harm our brand, business, prospects, financial condition and operating results. \\n\\nWe may be unable to grow our global product sales, delivery and installation capabilities and our servicing and vehicle charging networks, or we may be unable to accurately project and effectively manage our growth.\\n\\nOur success will depend on our ability to continue to expand our sales capabilities . We also frequently adjust our retail operations and product offerings in order to optimize our reach, costs, product line-up and model differentiation and customer experience. However, there is no guarantee that such steps will be accepted by consumers accustomed to traditional sales strategies. For example, marketing methods such as touchless test drives that we have pioneered in certain markets have not been proven at scale. We are targeting with Model 3 and Model Y a global mass demographic with a broad range of potential customers, in which we have relatively limited experience projecting demand and pricing our products. We currently produce numerous international variants at a limited number of factories, and if our specific demand expectations for these variants prove inaccurate, we may not be able to timely generate deliveries matched to the vehicles that we produce in the same timeframe or that are commensurate with the size of our operations in a given region. Likewise, as we develop and grow our energy products and services worldwide, our success will depend on our ability to correctly forecast demand in various markets. \\n\\nBecause we do not have independent dealer networks, we are responsible for delivering all of our vehicles to our customers. While we have improved our delivery logistics, we may face difficulties with deliveries at increasing volumes, particularly in international markets requiring significant transit times. For example, we saw challenges in ramping our logistics channels in China and Europe to initially deliver Model 3 there in the first quarter of 2019. We have deployed a number of delivery models, such as deliveries to customers’ homes and workplaces and touchless deliveries, but there is no guarantee that such models will be scalable or be accepted globally. Likewise, as we ramp Solar Roof, we are working to substantially increase installation personnel and decrease installation times. If we are not successful in matching such capabilities with actual production, or if we experience unforeseen production delays or inaccurately forecast demand for the Solar Roof, our business, financial condition and operating results may be harmed. \\n\\nMoreover, because of our unique expertise with our vehicles, we recommend that our vehicles be serviced by us or by certain authorized professionals. If we experience delays in adding such servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, particularly higher-volume and newer additions to our fleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory. Similarly, the increasing number of Tesla vehicles also requires us to continue to rapidly increase the number of our Supercharger stations and connectors throughout the world. \\n\\nThere is no assurance that we will be able to ramp our business to meet our sales, delivery, installation, servicing and vehicle charging targets globally, that our projections on which such targets are based will prove accurate or that the pace of growth or coverage of our customer infrastructure network will meet customer expectations. These plans require significant cash investments and management resources and there is no guarantee that they will generate additional sales or installations of our products, or that we will be able to avoid cost overruns or be able to hire additional personnel to support them. As we expand, w e will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products, the sale or dispatch of electricity related to our energy products and the operation of Superchargers. If we fail to manage our growth effectively, it may harm our brand, business, prospects, financial condition and operating results.\\n\\nOur future growth and success are dependent upon consumers’ demand for electric vehicles and specifically our vehicles in an automotive industry that is generally competitive, cyclical and volatile. \\n\\nIf the market for electric vehicles in general and Tesla vehicles in particular does not develop as we expect, develops more slowly than we expect, or if demand for our vehicles decreases in our markets or our vehicles compete with each other, our business, prospects, financial condition and operating results may be harmed. \\n\\nWe are still at an earlier stage and have limited resources and production relative to established competitors that offer internal combustion engine vehicles. In addition, electric vehicles still comprise a small percentage of overall vehicle sales. As a result, the market for our vehicles could be negatively affected by numerous factors, such as: \\n\\n##TABLE_START  \\n\\n• \\n\\nperceptions about electric vehicle features, quality, safety, performance and cost; \\n\\n##TABLE_END\\n\\n##TABLE_START  \\n\\n• \\n\\nperceptions about the limited range over which electric vehicles may be driven on a single battery charge, and access to charging facilities; \\n\\n##TABLE_END\\n\\n##TABLE_START  \\n\\n• \\n\\ncompetition, including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy internal combustion engine vehicles; \\n\\n##TABLE_END\\n\\n##TABLE_START  \\n\\n• \\n\\nvolatility in the cost of oil and gasoline, such as wide fluctuations in crude oil prices during 2020; \\n\\n##TABLE_END\\n\\n \\n\\n##TABLE_START  \\n\\n• \\n\\ngovernment regulations and economic incentives; and \\n\\n##TABLE_END\\n\\n##TABLE_START  \\n\\n• \\n\\nconcerns about our future viability. \\n\\n##TABLE_END\\n\\nFinally, the target demographics for our vehicles, particularly Model 3 and Model Y, are highly competitive. Sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose us to further volatility as we expand and adjust our operations and retail strategies. Moreover, the COVID-19 pandemic may negatively impact the transportation and automotive industries long-term. It is uncertain as to how such macroeconomic factors will impact us as a company that has been experiencing growth and increasing market share in an industry that has globally been experiencing a recent decline in sales.\\n\\nOur suppliers may fail to deliver components according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these components effectively.\\n\\nOur products contain thousands of parts that we purchase globally from hundreds of mostly single-source direct suppliers, generally without long-term supply agreements. This exposes us to multiple potential sources of component shortages, such as those that we experienced in 2012 and 2016 with our Model S and Model X ramps. Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters such as the March 2011 earthquakes in Japan, health epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational. For example, a global shortage of microchips has been reported since early 2021, and the impact to us is yet unknown. The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products. Moreover, significant increases in our production, such as for Model 3 and Model Y, or product design changes by us have required and may in the future require us to procure additional components in a short amount of time. Our suppliers may not be willing or able to sustainably meet our timelines or our cost, quality and volume needs, or to do so may cost us more, which may require us to replace them with other sources. Finally, we have limited vehicle manufacturing experience outside of the Fremont Factory and we may experience issues increasing the level of localized procurement at our Gigafactory Shanghai and at future factories such as Gigafactory Berlin and Gigafactory Texas. While we believe that we will be able to secure additional or alternate sources or develop our own replacements for most of our components, there is no assurance that we will be able to do so quickly or at all. Additionally, we may be unsuccessful in our continuous efforts to negotiate with existing suppliers to obtain cost reductions and avoid unfavorable changes to terms, source less expensive suppliers for certain parts and redesign certain parts to make them less expensive to produce. Any of these occurrences may harm our business, prospects, financial condition and operating results.\\n\\nAs the scale of our vehicle production increases, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities and servicing locations internationally. If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write-off costs, which may harm our business and operating results.\\n\\nWe may be unable to meet our projected construction timelines, costs and production ramps at new factories, or we may experience difficulties in generating and maintaining demand for products manufactured there. \\n\\nOur ability to increase production of our vehicles on a sustained basis, make them affordable globally by accessing local supply chains and workforces and streamline delivery logistics is dependent on the construction and ramp of Gigafactory Shanghai, Gigafactory Berlin and Gigafactory Texas. The construction of and commencement and ramp of production at these factories are subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion, potential supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale. For example, we are currently constructing Gigafactory Berlin under conditional permits. Moreover, we intend to incorporate sequential design and manufacturing changes into vehicles manufactured at each new factory. We have limited experience to date with developing and implementing vehicle manufacturing innovations outside of the Fremont Factory, as we only recently began production at Gigafactory Shanghai. In particular, the majority of our design and engineering resources are currently located in California. In order to meet our expectations for our new factories, we must expand and manage localized design and engineering talent and resources. If we experience any issues or delays in meeting our projected timelines, costs, capital efficiency and production capacity for our new factories, expanding and managing teams to implement iterative design and production changes there, maintaining and complying with the terms of any debt financing that we obtain to fund them or generating and maintaining demand for the vehicles we manufacture there, our business, prospects, operating results and financial condition may be harmed. \\n\\n \\n\\nWe will need to maintain and significantly grow our access to battery cells, including through the development and manufacture of our own cells, and control our related costs. \\n\\nWe are dependent on the continued supply of lithium-ion battery cells for our vehicles and energy storage products, and we will require substantially more cells to grow our business according to our plans. Currently, we rely on suppliers such as Panasonic for these cells. However, we have to date fully qualified only a very limited number of such suppliers and have limited flexibility in changing suppliers. Any disruption in the supply of battery cells from our suppliers could limit production of our vehicles and energy storage products. In the long term, we intend to supplement cells from our suppliers with cells manufactured by us, which we believe will be more efficient, manufacturable at greater volumes and cost-effective than currently available cells. However, our efforts to develop and manufacture such battery cells have required and may require significant investments, and there can be no assurance that we will be able to achieve these targets in the timeframes that we have planned or at all. If we are unable to do so, we may have to curtail our planned vehicle and energy storage product production or procure additional cells from suppliers at potentially greater costs, either of which may harm our business and operating results. \\n\\nIn addition, the cost of battery cells, whether manufactured by our suppliers or by us, depends in part upon the prices and availability of raw materials such as lithium, nickel, cobalt and/or other metals. The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products. Any reduced availability of these materials may impact our access to cells and any increases in their prices may reduce our profitability if we cannot recoup the increased costs through increased vehicle prices. Moreover, any such attempts to increase product prices may harm our brand, prospects and operating results.\\n\\nWe face strong competition for our products and services from a growing list of established and new competitors. \\n\\nThe worldwide automotive market is highly competitive today and we expect it will become even more so in the future. For example, Model 3 and Model Y face competition from existing and future automobile manufacturers in the extremely competitive entry-level premium sedan and compact SUV markets. A significant and growing number of established and new automobile manufacturers, as well as other companies, have entered or are reported to have plans to enter the market for electric and other alternative fuel vehicles, including hybrid, plug-in hybrid and fully electric vehicles, as well as the market for self-driving technology and other vehicle applications and software platforms. In some cases, our competitors offer or will offer electric vehicles in important markets such as China and Europe, and/or have announced an intention to produce electric vehicles exclusively at some point in the future. Many of our competitors have significantly greater or better-established resources than we do to devote to the design, development, manufacturing, distribution, promotion, sale and support of their products. Increased competition could result in our lower vehicle unit sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which may harm our business, financial condition and operating results.\\n\\nWe also face competition in our energy generation and storage business from other manufacturers, developers, installers and service providers of competing energy systems, as well as from large utilities. Decreases in the retail or wholesale prices of electricity from utilities or other renewable energy sources could make our products less attractive to customers and lead to an increased rate of residential customer defaults under our existing long-term leases and PPAs. \\n\\n \\n\\nRisks Related to Our Operations\\n\\nWe may experience issues with lithium-ion cells or other components manufactured at Gigafactory Nevada, which may harm the production and profitability of our vehicle and energy storage products.\\n\\nOur plan to grow the volume and profitability of our vehicles and energy storage products depends on significant lithium-ion battery cell production by our partner Panasonic at Gigafactory Nevada. Although Panasonic has a long track record of producing high-quality cells at significant volume at its factories in Japan, it has relatively limited experience with cell production at Gigafactory Nevada , which began in 2017. Moreover, although Panasonic is co-located with us at Gigafactory Nevada, it is free to make its own operational decisions, such as its determination to temporarily suspend its manufacturing there in response to the COVID-19 pandemic. In addition, we produce several vehicle components, such as battery modules and packs incorporating the cells produced by Panasonic for Model 3 and Model Y and drive units (including to support Gigafactory Shanghai production), at Gigafactory Nevada, and we also manufacture energy storage products there. In the past, some of the manufacturing lines for certain product components took longer than anticipated to ramp to their full capacity, and additional bottlenecks may arise in the future as we continue to increase the production rate and introduce new lines. If we or Panasonic are unable to or otherwise do not maintain and grow our respective operations at Gigafactory Nevada production, or if we are unable to do so cost-effectively or hire and retain highly-skilled personnel there, our ability to manufacture our products profitably would be limited, which may harm our business and operating results.\\n\\nFinally, the high volumes of lithium-ion cells and battery modules and packs manufactured at Gigafactory Nevada are stored and recycled at our various facilities. Any mishandling of battery cells may cause disruption to the operation of such facilities. While \\n\\n \\n\\nwe have implemented safety procedures related to the handling of the cells, there can be no assurance that a safety issue or fire related to the cells would not disrupt our operations . Any such disruptions or issues may harm our brand and business. \\n\\nWe face risks associated with maintaining and expanding our international operations, including unfavorable and uncertain regulatory, political, economic, tax and labor conditions.\\n\\nWe are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in numerous jurisdictions, over which we have little control and which are inherently unpredictable. Our operations in such jurisdictions, particularly as a company based in the U.S., create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures; organizing local operating entities; establishing, staffing and managing foreign business locations; attracting local customers; navigating foreign government taxes, regulations and permit requirements; enforceability of our contractual rights; trade restrictions, customs regulations, tariffs and price or exchange controls; and preferences in foreign nations for domestically manufactured products. Such conditions may increase our costs, impact our ability to sell our products and require significant management attention, and may harm our business if we unable to manage them effectively.\\n\\nOur business may suffer if our products or features contain defects, fail to perform as expected or take longer than expected to become fully functional.\\n\\nIf our products contain design or manufacturing defects that cause them not to perform as expected or that require repair, or certain features of our vehicles such as new Autopilot or FSD features take longer than expected to become enabled, are legally restricted or become subject to onerous regulation, our ability to develop, market and sell our products and services may be harmed, and we may experience delivery delays, product recalls, product liability, breach of warranty and consumer protection claims and significant warranty and other expenses . In particular, our products are highly dependent on software, which is inherently complex and may contain latent defects or errors or be subject to external attacks. Issues experienced by our customers have included those related to the Model S and Model X 17-inch display screen, the panoramic roof and the 12-volt battery in the Model S, the seats and doors in the Model X and the operation of solar panels installed by us. Although we attempt to remedy any issues we observe in our products as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not completely satisfy our customers. While we have performed extensive internal testing on our products and features, we currently have a limited frame of reference by which to evaluate their long-term quality, reliability, durability and performance characteristics. There can be no assurance that we will be able to detect and fix any defects in our products prior to their sale to or installation for customers.\\n\\nWe may be required to defend or insure against product liability claims.\\n\\nThe automobile industry generally experiences significant product liability claims, and as such we face the risk of such claims in the event our vehicles do not perform or are claimed to not have performed as expected. As is true for other automakers, our vehicles have been involved and we expect in the future will be involved in accidents resulting in death or personal injury, and such accidents where Autopilot or FSD features are engaged are the subject of significant public attention. We have experienced and we expect to continue to face claims arising from or related to misuse or claimed failures of such new technologies that we are pioneering. In addition, the battery packs that we produce make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. While we have designed our battery packs to passively contain any single cell’s release of energy without spreading to neighboring cells, there can be no assurance that a field or testing failure of our vehicles or other battery packs that we produce will not occur, in particular due to a high-speed crash. Likewise, as our solar energy systems and energy storage products generate and store electricity, they have the potential to fail or cause injury to people or property. Any product liability claim may subject us to lawsuits and substantial monetary damages, product recalls or redesign efforts, and even a meritless claim may require us to defend it, all of which may generate negative publicity and be expensive and time-consuming. In most jurisdictions, we generally self-insure against the risk of product liability claims for vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds and not by insurance.\\n\\nWe will need to maintain public credibility and confidence in our long-term business prospects in order to succeed.\\n\\nIn order to maintain and grow our business, we must maintain credibility and confidence among customers, suppliers, analysts, investors, ratings agencies and other parties in our long-term financial viability and business prospects. Maintaining such confidence may be challenging due to our limited operating history relative to established competitors; customer unfamiliarity with our products; any delays we may experience in scaling manufacturing, delivery and service operations to meet demand; competition and uncertainty regarding the future of electric vehicles or our other products and services; our quarterly production and sales performance compared with market expectations; and other factors including those over which we have no control. In particular, Tesla’s products, business, results of operations, statements and actions are well-publicized by a range of third parties. Such attention includes frequent criticism, which is often exaggerated or unfounded, such as speculation regarding the sufficiency or stability of our management team. Any such negative perceptions, whether caused by us or not, may harm our business and make it more difficult to raise additional funds if needed.\\n\\n \\n\\nWe may be unable to effectively grow, or manage the compliance, residual value, financing and credit risks related to, our various financing programs. \\n\\nWe offer financing arrangements for our vehicles in North America, Europe and Asia primarily through various financial institutions. We also currently offer vehicle financing arrangements directly through our local subsidiaries in certain markets. Depending on the country, such arrangements are available for specified models and may include operating leases directly with us under which we typically receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease. We have also offered various arrangements for customers of our solar energy systems whereby they pay us a fixed payment to lease or finance the purchase of such systems or purchase electricity generated by them. If we do not successfully monitor and comply with applicable national, state and/or local financial regulations and consumer protection laws governing these transactions, we may become subject to enforcement actions or penalties.\\n\\nThe profitability of any directly-leased vehicles returned to us at the end of their leases depends on our ability to accurately project our vehicles’ residual values at the outset of the leases, and such values may fluctuate prior to the end of their terms depending on various factors such as supply and demand of our used vehicles, economic cycles and the pricing of new vehicles. We have made in the past and may make in the future certain adjustments to our prices from time to time in the ordinary course of business, which may impact the residual values of our vehicles and reduce the profitability of our vehicle leasing program. The funding and growth of this program also relies on our ability to secure adequate financing and/or business partners. If we are unable to adequately fund our leasing program through internal funds, partners or other financing sources, and compelling alternative financing programs are not available for our customers who may expect or need such options, we may be unable to grow our vehicle deliveries. Furthermore, if our vehicle leasing business grows substantially, our business may suffer if we cannot effectively manage the resulting greater levels of residual risk.\\n\\nSimilarly, we have provided resale value guarantees to vehicle customers and partners for certain financing programs, under which such counterparties may sell their vehicles back to us at certain points in time at pre-determined amounts. However, actual resale values are subject to fluctuations over the term of the financing arrangements, such as from the vehicle pricing changes discussed above. If the actual resale values of any vehicles resold or returned to us pursuant to these programs are materially lower than the pre-determined amounts we have offered, our financial condition and operating results may be harmed.\\n\\nFinally, our vehicle and solar energy system financing programs and our energy storage sales programs also expose us to customer credit risk. In the event of a widespread economic downturn or other catastrophic event, our customers may be unable or unwilling to satisfy their payment obligations to us on a timely basis or at all. If a significant number of our customers default, we may incur substantial credit losses and/or impairment charges with respect to the underlying assets.\\n\\nWe must manage ongoing obligations under our agreement with the Research Foundation for the State University of New York relating to our Gigafactory New York.\\n\\nWe are party to an operating lease and a research and development agreement through the SUNY Foundation. These agreements provide for the construction and use of our Gigafactory New York, which we have primarily used for the development and production of our Solar Roof and other solar products and components, energy storage components and Supercharger components, and for other lessor-approved functions. Under this agreement, we are obligated to, among other things, meet employment targets as well as specified minimum numbers of personnel in the State of New York and in Buffalo, New York and spend or incur $5.00 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of New York during the 10-year period beginning April 30, 2018. As we temporarily suspended most of our manufacturing operations at Gigafactory New York pursuant to a New York State executive order issued in March 2020 as a result of the COVID-19 pandemic, we were granted a one-year deferral of our obligation to be compliant with our applicable targets under such agreement on April 30, 2020, which was memorialized in an amendment to our agreement with the SUNY Foundation in July 2020. While we expect to have and grow significant operations at Gigafactory New York and the surrounding Buffalo area, any failure by us in any year over the course of the term of the agreement to meet all applicable future obligations may result in our obligation to pay a “program payment” of $41 million to the SUNY Foundation for such year, the termination of our lease at Gigafactory New York which may require us to pay additional penalties and/or the need to adjust certain of our operations, in particular our production ramp of the Solar Roof or other components. Any of the foregoing events may harm our business, financial condition and operating results.\\n\\nIf we are unable to attract, hire and retain key employees and qualified personnel, our ability to compete may be harmed.\\n\\nThe loss of the services of any of our key employees or any significant portion of our workforce could disrupt our operations or delay the development, introduction and ramp of our products and services. In particular, we are highly dependent on the services of Elon Musk, our Chief Executive Officer. None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business. Our future success also depends upon our ability to attract, hire and retain a large number of engineering, manufacturing, marketing, sales and delivery, service, installation, technology and support personnel, especially to support our planned high-volume product sales, market and geographical \\n\\n \\n\\nexpansion and technological innovation s . Recruiting efforts, particularly for senior employees, may be time-consuming, which may delay the execution of our plans. If we are not successful in managing these risks, our business, financial condition and operating results may be harmed. \\n\\nEmployees may leave Tesla or choose other employers over Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technology experience, or any negative publicity related to us. In California, Nevada and other regions where we have operations, there is increasing competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, software engineering, manufacturing engineering and electrical and building construction expertise. Moreover, we may be impacted by perceptions relating to reductions in force that we have conducted in the past in order to optimize our organizational structure and reduce costs and the departure of certain senior personnel for various reasons. Likewise, as a result of our temporary suspension of various U.S. manufacturing operations in the first half of 2020, in April 2020 we temporarily furloughed certain hourly employees and reduced most salaried employees’ base salaries. We also compete with both mature and prosperous companies that have far greater financial resources than we do and start-ups and emerging companies that promise short-term growth opportunities. \\n\\nFinally, our compensation philosophy for all of our personnel reflects our startup origins, with an emphasis on equity-based awards and benefits in order to closely align their incentives with the long-term interests of our stockholders. We periodically seek and obtain approval from our stockholders for future increases to the number of awards available under our equity incentive and employee stock purchase plans. If we are unable to obtain the requisite stockholder approvals for such future increases, we may have to expend additional cash to compensate our employees and our ability to retain and hire qualified personnel may be harmed.\\n\\nWe are highly dependent on the services of Elon Musk, our Chief Executive Officer.\\n\\nWe are highly dependent on the services of Elon Musk, our Chief Executive Officer and largest stockholder. Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla. Mr. Musk also currently serves as Chief Executive Officer and Chief Technical Officer of Space Exploration Technologies Corp., a developer and manufacturer of space launch vehicles, and is involved in other emerging technology ventures.\\n\\nWe must manage risks relating to our information technology systems and the threat of intellectual property theft, data breaches and cyber-attacks. \\n\\nWe must continue to expand and improve our information technology systems as our operations grow, such as product data management, procurement, inventory management, production planning and execution, sales, service and logistics, dealer management, financial, tax and regulatory compliance systems. This includes the implementation of new internally developed systems and the deployment of such systems in the U.S. and abroad. We must also continue to maintain information technology measures designed to protect us against intellectual property theft, data breaches, sabotage and other external or internal cyber-attacks or misappropriation. However, the implementation, maintenance, segregation and improvement of these systems require significant management time, support and cost, and there are inherent risks associated with developing, improving and expanding our core systems as well as implementing new systems and updating current systems, including disruptions to the related areas of business operation. These risks may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver and service products, adequately protect our intellectual property or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations. \\n\\nMoreover, if we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and/or timely report our financial results could be impaired and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results. Moreover, our proprietary information or intellectual property could be compromised or misappropriated and our reputation may be adversely affected. If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.\\n\\nAny unauthorized control or manipulation of our products’ systems could result in loss of confidence in us and our products.\\n\\nOur products contain complex information technology systems. For example, our vehicles and energy storage products are designed with built-in data connectivity to accept and install periodic remote updates from us to improve or update their functionality. While we have implemented security measures intended to prevent unauthorized access to our information technology networks, our products and their systems, malicious entities have reportedly attempted, and may attempt in the future, to gain unauthorized access to modify, alter and use such networks, products and systems to gain control of, or to change, our products’ functionality, user interface and performance characteristics or to gain access to data stored in or generated by our products. We encourage reporting of potential vulnerabilities in the security of our products through our security vulnerability reporting policy, and we aim to remedy any reported and verified vulnerability. However, there can be no assurance that any vulnerabilities will not be exploited before they can be identified, or that our remediation efforts are or will be successful.\\n\\n \\n\\nAny unauthorized access to or control of our products or their systems or any loss of data could result in legal claims or government investigations . In addition, regardless of their veracity, reports of unauthorized access to our products, their systems or data, as well as other factors that may result in the perception that our products, their systems or data are capable of being hacked, may harm our brand, prospects and operating results. We have been the subject of such reports in the past. \\n\\nOur business may be adversely affected by any disruptions caused by union activities. \\n\\nIt is not uncommon for employees of certain trades at companies such as us to belong to a union, which can result in higher employee costs and increased risk of work stoppages. Moreover, regulations in some jurisdictions outside of the U.S. mandate employee participation in industrial collective bargaining agreements and work councils with certain consultation rights with respect to the relevant companies’ operations. Although we work diligently to provide the best possible work environment for our employees, they may still decide to join or seek recognition to form a labor union, or we may be required to become a union signatory. From time to time, labor unions have engaged in campaigns to organize certain of our operations, as part of which such unions have filed unfair labor practice charges against us with the National Labor Relations Board, and they may do so in the future. In September 2019, an administrative law judge issued a recommended decision for Tesla on certain issues and against us on certain others. The National Labor Relations Board has not yet adopted the recommendation and we have appealed certain aspects of the recommended decision. Any unfavorable ultimate outcome for Tesla may have a negative impact on the perception of Tesla’s treatment of our employees. Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as suppliers and trucking and freight companies. Any work stoppages or strikes organized by such unions could delay the manufacture and sale of our products and may harm our business and operating results.\\n\\nWe may choose to or be compelled to undertake product recalls or take other similar actions. \\n\\nAs a manufacturing company, we must manage the risk of product recalls with respect to our products. Recalls for our vehicles have resulted from, for example, industry-wide issues with airbags from a particular supplier, concerns of corrosion in Model S and Model X power steering assist motor bolts, certain suspension failures in Model S and Model X and issues with Model S and Model X media control units. In addition to recalls initiated by us for various causes, testing of or investigations into our products by government regulators or industry groups may compel us to initiate product recalls or may result in negative public perceptions about the safety of our products, even if we disagree with the defect determination or have data that shows the actual safety risk to be non-existent. In the future, we may voluntarily or involuntarily initiate recalls if any of our products are determined by us or a regulator to contain a safety defect or be noncompliant with applicable laws and regulations, such as U.S. federal motor vehicle safety standards. Such recalls, whether voluntary or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could result in significant expense, supply chain complications and service burdens, and may harm our brand, business, prospects, financial condition and operating results.\\n\\nOur current and future warranty reserves may be insufficient to cover future warranty claims. \\n\\nWe provide a manufacturer’s warranty on all new and used Tesla vehicles we sell. We also provide certain warranties with respect to the energy generation and storage systems we sell, including on their installation and maintenance, and for components not manufactured by us, we generally pass through to our customers the applicable manufacturers’ warranties. As part of our energy generation and storage system contracts, we may provide the customer with performance guarantees that warrant that the underlying system will meet or exceed the minimum energy generation or other energy performance requirements specified in the contract. Under these performance guarantees, we bear the risk of electricity production or other performance shortfalls, even if they result from failures in components from third party manufacturers. These risks are exacerbated in the event such manufacturers cease operations or fail to honor their warranties.\\n\\nIf our warranty reserves are inadequate to cover future warranty claims on our products, our financial condition and operating results may be harmed. Warranty reserves include our management’s best estimates of the projected costs to repair or to replace items under warranty, which are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims. Such estimates are inherently uncertain and changes to our historical or projected experience, especially with respect to products such as Model 3, Model Y and Solar Roof that we have recently introduced and/or that we expect to produce at significantly greater volumes than our past products, may cause material changes to our warranty reserves in the future.\\n\\nOur insurance coverage strategy may not be adequate to protect us from all business risks.\\n\\nWe may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage. As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all. Additionally, the policies that we do have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us. A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which may harm our financial condition and operating results.\\n\\n \\n\\nThere is no guarantee that we will have sufficient cash flow from our business to pay our substantial indebtedness or that we will not incur additional indebtedness. \\n\\nAs of December 31, 2020, we and our subsidiaries had outstanding $10.57 billion in aggregate principal amount of indebtedness (see Note 12, Debt , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K). Our substantial consolidated indebtedness may increase our vulnerability to any generally adverse economic and industry conditions. We and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt or recapitalize our debt. \\n\\nHolders of convertible senior notes issued by us or our subsidiary may convert such notes at their option prior to the scheduled maturities of the respective convertible senior notes under certain circumstances pursuant to the terms of such notes. Upon conversion of the applicable convertible senior notes, we will be obligated to deliver cash and/or shares pursuant to the terms of such notes. For example, as our stock price has significantly increased recently, we have seen higher levels of early conversions of such “in-the-money” convertible senior notes. Moreover, holders of such convertible senior notes may have the right to require us to repurchase their notes upon the occurrence of a fundamental change pursuant to the terms of such notes.\\n\\nOur ability to make scheduled payments of the principal and interest on our indebtedness when due, to make payments upon conversion or repurchase demands with respect to our convertible senior notes or to refinance our indebtedness as we may need or desire, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our existing indebtedness and any future indebtedness we may incur, and to make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance existing or future indebtedness will depend on the capital markets and our financial condition at such time. In addition, our ability to make payments may be limited by law, by regulatory authority or by agreements governing our future indebtedness. We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our existing or future indebtedness and harm our financial condition and operating results.\\n\\nOur debt agreements contain covenant restrictions that may limit our ability to operate our business. \\n\\nThe terms of certain of our credit facilities, including our senior asset-based revolving credit agreement, contain, and any of our other future debt agreements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our ability to, among other things, incur additional debt or issue guarantees, create liens, repurchase stock, or make other restricted payments, and make certain voluntary prepayments of specified debt. In addition, under certain circumstances we are required to comply with a fixed charge coverage ratio. As a result of these covenants, our ability to respond to changes in business and economic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted. Furthermore, our failure to comply with our debt covenants could result in a default under our debt agreements, which could permit the holders to accelerate our obligation to repay the debt. If any of our debt is accelerated, we may not have sufficient funds available to repay it.\\n\\nAdditional funds may not be available to us when we need or want them.\\n\\nOur business and our future plans for expansion are capital-intensive, and the specific timing of cash inflows and outflows may fluctuate substantially from period to period. We may need or want to raise additional funds through the issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions to fund, together with our principal sources of liquidity, the costs of developing and manufacturing our current or future products, to pay any significant unplanned or accelerated expenses or for new significant strategic investments, or to refinance our significant consolidated indebtedness, even if not required to do so by the terms of such indebtedness. We cannot be certain that additional funds will be available to us on favorable terms when required, or at all. If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially and adversely affected.\\n\\nWe may be negatively impacted by any early obsolescence of our manufacturing equipment.\\n\\nWe depreciate the cost of our manufacturing equipment over their expected useful lives. However, product cycles or manufacturing technology may change periodically, and we may decide to update our products or manufacturing processes more quickly than expected. Moreover, improvements in engineering and manufacturing expertise and efficiency may result in our ability to manufacture our products using less of our currently installed equipment. Alternatively, as we ramp and mature the production of our products to higher levels, we may discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations may be harmed.\\n\\n \\n\\nWe hold and may acquire digital assets that may be subject to volatile market prices, impairmen t and unique risks of loss. \\n\\n \\n\\nIn January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.\\n\\n \\n\\nThe prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable. Moreover, their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence. Finally, the extent to which securities laws or other regulations apply or may apply in the future to such assets is unclear and may change in the future. If we hold digital assets and their values decrease relative to our purchase prices, our financial condition may be harmed.\\n\\n \\n\\nMoreover, digital assets are currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale, which may adversely affect our operating results in any period in which such impairment occurs . Moreover, there is no guarantee that future changes in GAAP will not require us to change the way we account for digital assets held by us. \\n\\n \\n\\nFinally, as intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets. While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed.\\n\\nWe are exposed to fluctuations in currency exchange rates.\\n\\nWe transact business globally in multiple currencies and have foreign currency risks related to our revenue, costs of revenue, operating expenses and localized subsidiary debt denominated in currencies other than the U.S. dollar, currently primarily the Chinese yuan, euro, Canadian dollar and British pound. To the extent we have significant revenues denominated in such foreign currencies, any strengthening of the U.S. dollar would tend to reduce our revenues as measured in U.S. dollars, as we have historically experienced. In addition, a portion of our costs and expenses have been, and we anticipate will continue to be, denominated in foreign currencies, including the Chinese yuan and Japanese yen. If we do not have fully offsetting revenues in these currencies and if the value of the U.S. dollar depreciates significantly against these currencies, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase and our margins will suffer. Moreover, while we undertake limited hedging activities intended to offset the impact of currency translation exposure, it is impossible to predict or eliminate such impact. As a result, our operating results may be harmed.\\n\\nWe may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and expensive. \\n\\nOur competitors or other third parties may hold or obtain patents, copyrights, trademarks or other proprietary rights that could prevent, limit or interfere with our ability to make, use, develop, sell or market our products and services, which could make it more difficult for us to operate our business. From time to time, the holders of such intellectual property rights may assert their rights and urge us to take licenses and/or may bring suits alleging infringement or misappropriation of such rights, which could result in substantial costs, negative publicity and management attention, regardless of merit. While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or advance our strategic initiatives, there can be no assurance that we will be able to adequately identify and protect the portions of intellectual property that are strategic to our business, or mitigate the risk of potential suits or other legal demands by our competitors. Accordingly, we may consider the entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses. In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain components or intellectual property into the goods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative \\n\\n \\n\\nbranding for our products and services. In the event that we are required to take one or more such actions, our brand, business, financial condition and operating results may be harmed. \\n\\nOur operations could be adversely affected by events outside of our control, such as natural disasters, wars or health epidemics.\\n\\nWe may be impacted by natural disasters, wars, health epidemics or other events outside of our control. For example, our corporate headquarters, the Fremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in a flood-prone area. If major disasters such as earthquakes, floods or other events occur, or our information system or communications network breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products. In addition, the global COVID-19 pandemic has impacted economic markets, manufacturing operations, supply chains, employment and consumer behavior in nearly every geographic region and industry across the world, and we have been, and may in the future be, adversely affected as a result. We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.\\n\\nRisks Related to Government Laws and Regulations\\n\\nDemand for our products and services may be impacted by the status of government and economic incentives supporting the development and adoption of such products.\\n\\nGovernment and economic incentives that support the development and adoption of electric vehicles in the U.S. and abroad, including certain tax exemptions, tax credits and rebates, may be reduced, eliminated or exhausted from time to time. For example, a $7,500 federal tax credit that was available in the U.S. for the purchase of our vehicles was reduced in phases during and ultimately ended in 2019. We believe that this sequential phase-out likely pulled forward some vehicle demand into the periods preceding each reduction. Moreover, previously available incentives favoring electric vehicles in areas including Ontario, Canada, Germany, Hong Kong, Denmark and California have expired or were cancelled or temporarily unavailable, and in some cases were not eventually replaced or reinstituted, which may have negatively impacted sales. Any similar developments could have some negative impact on demand for our vehicles, and we and our customers may have to adjust to them.\\n\\nIn addition, certain governmental rebates, tax credits and other financial incentives that are currently available with respect to our solar and energy storage product businesses allow us to lower our costs and encourage customers to buy our products and investors to invest in our solar financing funds. However, these incentives may expire when the allocated funding is exhausted, reduced or terminated as renewable energy adoption rates increase, sometimes without warning. For example, the U.S. federal government currently offers certain tax credits for the installation of solar power facilities and energy storage systems that are charged from a co-sited solar power facility; however, these tax credits are currently scheduled to decline and/or expire in 2023 and beyond. Likewise, in jurisdictions where net metering is currently available, our customers receive bill credits from utilities for energy that their solar energy systems generate and export to the grid in excess of the electric load they use. The benefit available under net metering has been or has been proposed to be reduced, altered or eliminated in several jurisdictions, and has also been contested and may continue to be contested before the FERC. Any reductions or terminations of such incentives may harm our business, prospects, financial condition and operating results by making our products less competitive for potential customers, increasing our cost of capital and adversely impacting our ability to attract investment partners and to form new financing funds for our solar and energy storage assets. \\n\\nFinally, we and our fund investors claim these U.S. federal tax credits and certain state incentives in amounts based on independently appraised fair market values of our solar and energy storage systems. Nevertheless, the relevant governmental authorities have audited such values and in certain cases have determined that these values should be lower, and they may do so again in the future. Such determinations may result in adverse tax consequences and/or our obligation to make indemnification or other payments to our funds or fund investors.\\n\\nWe are subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our operations or products. \\n\\nAs we grow our manufacturing operations in additional regions, we are or will be subject to complex environmental, manufacturing, health and safety laws and regulations at numerous jurisdictional levels in the U.S., China, Germany and other locations abroad, including laws relating to the use, handling, storage, recycling, disposal and/or human exposure to hazardous materials, product material inputs and post-consumer products and with respect to constructing, expanding and maintaining our facilities. The costs of compliance, including remediations of any discovered issues and any changes to our operations mandated by new or amended laws, may be significant, and any failures to comply could result in significant expenses, delays or fines. We are also subject to laws and regulations applicable to the supply, manufacture, import, sale and service of automobiles both domestically and abroad. For example, in countries outside of the U.S., we are required to meet standards relating to vehicle safety, fuel economy and \\n\\n \\n\\nemissions that are often materially different from requirements in the U.S., thus resulting in additional investment into the vehicles and systems to ensure regulatory compliance in those countries. This process may include official review and certification of our vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements. \\n\\nIn particular, we offer in our vehicles Autopilot and FSD features that today assist drivers with certain tedious and potentially dangerous aspects of road travel, but which currently require drivers to remain fully engaged in the driving operation. We are continuing to develop our FSD technology with the goal of achieving full self-driving capability in the future. There are a variety of international, federal and state regulations that may apply to self-driving vehicles, which include many existing vehicle standards that were not originally intended to apply to vehicles that may not have a driver. Such regulations continue to rapidly change, which increases the likelihood of a patchwork of complex or conflicting regulations, or may delay products or restrict self-driving features and availability, which could adversely affect our business.\\n\\nFinally, as a manufacturer, installer and service provider with respect to solar generation and energy storage systems and a supplier of electricity generated and stored by the solar energy and energy storage systems we install for customers, we are impacted by federal, state and local regulations and policies concerning electricity pricing, the interconnection of electricity generation and storage equipment with the electric grid and the sale of electricity generated by third party-owned systems. If regulations and policies that adversely impact the interconnection or use of our solar and energy storage systems are introduced, they could deter potential customers from purchasing our solar and energy storage products, threaten the economics of our existing contracts and cause us to cease solar and energy storage system sales and operations in the relevant jurisdictions, which may harm our business, financial condition and operating results.\\n\\nAny failure by us to comply with a variety of U.S. and international privacy and consumer protection laws may harm us. \\n\\nAny failure by us or our vendor or other business partners to comply with our public privacy notice or with federal, state or international privacy, data protection or security laws or regulations relating to the processing, collection, use, retention, security and transfer of personally identifiable information could result in regulatory or litigation-related actions against us, legal liability, fines, damages, ongoing audit requirements and other significant costs. Substantial expenses and operational changes may be required in connection with maintaining compliance with such laws, and in particular certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application. For example, in May 2018, the General Data Protection Regulation began to fully apply to the processing of personal information collected from individuals located in the European Union, and has created new compliance obligations and significantly increased fines for noncompliance. Similarly, as of January 2020, the California Consumer Privacy Act imposes certain legal obligations on our use and processing of personal information related to California residents. Finally, new privacy and cybersecurity laws are coming into effect in China. Notwithstanding our efforts to protect the security and integrity of our customers’ personal information, we may be required to expend significant resources to comply with data breach requirements if, for example, third parties improperly obtain and use the personal information of our customers or we otherwise experience a data loss with respect to customers’ personal information. A major breach of our network security and systems may result in fines, penalties and damages and harm our brand, prospects and operating results.\\n\\nWe could be subject to liability, penalties and other restrictive sanctions and adverse consequences arising out of certain governmental investigations and proceedings.\\n\\nWe are cooperating with certain government investigations as discussed in Note 16, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. To our knowledge, no government agency in any such ongoing investigation has concluded that any wrongdoing occurred. However, we cannot predict the outcome or impact of any such ongoing matters, and there exists the possibility that we could be subject to liability, penalties and other restrictive sanctions and adverse consequences if the SEC, the U.S. Department of Justice or any other government agency were to pursue legal action in the future. Moreover, we expect to incur costs in responding to related requests for information and subpoenas, and if instituted, in defending against any governmental proceedings.\\n\\nFor example, on October 16, 2018, the U.S. District Court for the Southern District of New York entered a final judgment approving the terms of a settlement filed with the Court on September 29, 2018, in connection with the actions taken by the SEC relating to Mr. Musk’s statement on August 7, 2018 that he was considering taking Tesla private. Pursuant to the settlement, we, among other things, paid a civil penalty of $20 million, appointed an independent director as the chair of our board of directors, appointed two additional independent directors to our board of directors and made further enhancements to our disclosure controls and other corporate governance-related matters. On April 26, 2019, this settlement was amended to clarify certain of the previously-agreed disclosure procedures, which was subsequently approved by the Court. All other terms of the prior settlement were reaffirmed without modification. Although we intend to continue to comply with the terms and requirements of the settlement, if there is a lack of compliance or an alleged lack of compliance, additional enforcement actions or other legal proceedings may be instituted against us.\\n\\n \\n\\nWe may face regulatory challenges to or limitations on our ability to sell vehicles directly. \\n\\nWhile we intend to continue to leverage our most effective sales strategies, including sales through our website, we may not be able to sell our vehicles through our own stores in certain states in the U.S. with laws that may be interpreted to impose limitations on this direct-to-consumer sales model. It has also been asserted that the laws in some states limit our ability to obtain dealer licenses from state motor vehicle regulators, and such assertions persist. In certain locations, decisions by regulators permitting us to sell vehicles have been and may be challenged by dealer associations and others as to whether such decisions comply with applicable state motor vehicle industry laws. We have prevailed in many of these lawsuits and such results have reinforced our continuing belief that state laws were not intended to apply to a manufacturer that does not have franchise dealers. In some states, there have also been regulatory and legislative efforts by dealer associations to propose laws that, if enacted, would prevent us from obtaining dealer licenses in their states given our current sales model. A few states have passed legislation that clarifies our ability to operate, but at the same time limits the number of dealer licenses we can obtain or stores that we can operate. The application of state laws applicable to our operations continues to be difficult to predict.\\n\\nInternationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices. Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time. Continued regulatory limitations and other obstacles interfering with our ability to sell vehicles directly to consumers may harm our financial condition and operating results.\\n\\nRisks Related to the Ownership of Our Common Stock\\n\\nThe trading price of our common stock is likely to continue to be volatile.\\n\\nThe trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our common stock has experienced over the last 52 weeks an intra-day trading high of $900.40 per share and a low of $70.10 per share, as adjusted to give effect to the reflect the five-for-one stock split effected in the form of a stock dividend in August 2020 (the “Stock Split”) . The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. In particular, a large proportion of our common stock has been historically and may in the future be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price. Public perception and other factors outside of our control may additionally impact the stock price of companies like us that garner a disproportionate degree of public attention, regardless of actual operating performance. In addition, in the past, following periods of volatility in the overall market or the market price of our shares, securities class action litigation has been filed against us. While we defend such actions vigorously, any judgment against us or any future stockholder litigation could result in substantial costs and a diversion of our management’s attention and resources.\\n\\nOur financial results may vary significantly from period to period due to fluctuations in our operating costs and other factors.\\n\\nWe expect our period-to-period financial results to vary based on our operating costs, which we anticipate will fluctuate as the pace at which we continue to design, develop and manufacture new products and increase production capacity by expanding our current manufacturing facilities and adding future facilities, may not be consistent or linear between periods. Additionally, our revenues from period to period may fluctuate as we introduce existing products to new markets for the first time and as we develop and introduce new products. As a result of these factors, we believe that quarter-to-quarter comparisons of our financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance. Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results. If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.\\n\\nWe may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline. \\n\\nWe may provide from time to time guidance regarding our expected financial and business performance. Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certain respects, such as the timing of new product manufacturing ramps. Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes (which generally are not linear throughout a given period), average sales prices, supplier and commodity costs and planned cost reductions. If our guidance varies from actual results due to our assumptions not being met or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.\\n\\n \\n\\nTransactions relating to our convertible senior notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock. \\n\\nThe conversion of some or all of the convertible senior notes issued by us or our subsidiaries would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of such notes by their holders, and we may be required to deliver a significant number of shares. Any sales in the public market of the common stock issuable upon such conversion could adversely affect their prevailing market prices. In addition, the existence of the convertible senior notes may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or the anticipated conversion of such notes into shares of our common stock could depress the price of our common stock.\\n\\nMoreover, in connection with certain of the convertible senior notes, we entered into convertible note hedge transactions, which are expected to reduce the potential dilution and/or offset potential cash payments we are required to make in excess of the principal amount upon conversion of the applicable notes. We also entered into warrant transactions with the hedge counterparties, which could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants on the applicable expiration dates. In addition, the hedge counterparties or their affiliates may enter into various transactions with respect to their hedge positions, which could also affect the market price of our common stock or the convertible senior notes.\\n\\nIf Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline.\\n\\nCertain banking institutions have made extensions of credit to Elon Musk, our Chief Executive Officer, a portion of which was used to purchase shares of common stock in certain of our public offerings and private placements at the same prices offered to third-party participants in such offerings and placements. We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk. If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means. Any such sales could cause the price of our common stock to decline further.\\n\\nAnti-takeover provisions contained in our governing documents, applicable laws and our convertible senior notes could impair a takeover attempt.\\n\\nOur certificate of incorporation and bylaws afford certain rights and powers to our board of directors that may facilitate the delay or prevention of an acquisition that it deems undesirable. We are also subject to Section 203 of the Delaware General Corporation Law and other provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations. In addition, the terms of our convertible senior notes may require us to repurchase such notes in the event of a fundamental change, including a takeover of our company. Any of the foregoing provisions and terms that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.\\n\\n \\n\\n##TABLE_START '" | |
| ], | |
| "application/vnd.google.colaboratory.intrinsic+json": { | |
| "type": "string" | |
| } | |
| }, | |
| "metadata": {}, | |
| "execution_count": 22 | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "import re\n", | |
| "\n", | |
| "section_text = re.sub(\"##TABLE_START|##TABLE_END\", \"\", section_text)" | |
| ], | |
| "metadata": { | |
| "id": "MGzr6O6UB8WP" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "# GPT Summarizer — Putting It All Together\n", | |
| "\n", | |
| "Putting it all together is a breeze. We simply tell GPT to summarize the extracted text section in 15 sentences and add the section to our prompt after our task definition." | |
| ], | |
| "metadata": { | |
| "id": "Va6pnxJR1Zt7" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "prompt = f\"Summarize the following text in 15 sentencens:\\n{section_text}\"" | |
| ], | |
| "metadata": { | |
| "id": "T2M9_429jwLc" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "response = openai.Completion.create(\n", | |
| " engine=\"text-davinci-003\", \n", | |
| " prompt=prompt,\n", | |
| " temperature=0.3, \n", | |
| " max_tokens=500,\n", | |
| " top_p=1, \n", | |
| " frequency_penalty=0,\n", | |
| " presence_penalty=1\n", | |
| ")" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/", | |
| "height": 418 | |
| }, | |
| "id": "LXAoLUQFjy3n", | |
| "outputId": "2d1e3291-2c36-40e7-d0ed-6f96faab1e65" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "error", | |
| "ename": "InvalidRequestError", | |
| "evalue": "ignored", | |
| "traceback": [ | |
| "\u001b[0;31m---------------------------------------------------------------------------\u001b[0m", | |
| "\u001b[0;31mInvalidRequestError\u001b[0m Traceback (most recent call last)", | |
| "\u001b[0;32m<ipython-input-24-e0f233238a42>\u001b[0m in \u001b[0;36m<module>\u001b[0;34m\u001b[0m\n\u001b[0;32m----> 1\u001b[0;31m response = openai.Completion.create(\n\u001b[0m\u001b[1;32m 2\u001b[0m \u001b[0mengine\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0;34m\"text-davinci-003\"\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 3\u001b[0m \u001b[0mprompt\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0mprompt\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 4\u001b[0m \u001b[0mtemperature\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0;36m0.3\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 5\u001b[0m \u001b[0mmax_tokens\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0;36m500\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n", | |
| "\u001b[0;32m/usr/local/lib/python3.8/dist-packages/openai/api_resources/completion.py\u001b[0m in \u001b[0;36mcreate\u001b[0;34m(cls, *args, **kwargs)\u001b[0m\n\u001b[1;32m 23\u001b[0m \u001b[0;32mwhile\u001b[0m \u001b[0;32mTrue\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 24\u001b[0m \u001b[0;32mtry\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[0;32m---> 25\u001b[0;31m \u001b[0;32mreturn\u001b[0m \u001b[0msuper\u001b[0m\u001b[0;34m(\u001b[0m\u001b[0;34m)\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mcreate\u001b[0m\u001b[0;34m(\u001b[0m\u001b[0;34m*\u001b[0m\u001b[0margs\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0;34m**\u001b[0m\u001b[0mkwargs\u001b[0m\u001b[0;34m)\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[0m\u001b[1;32m 26\u001b[0m \u001b[0;32mexcept\u001b[0m \u001b[0mTryAgain\u001b[0m \u001b[0;32mas\u001b[0m \u001b[0me\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 27\u001b[0m \u001b[0;32mif\u001b[0m \u001b[0mtimeout\u001b[0m \u001b[0;32mis\u001b[0m \u001b[0;32mnot\u001b[0m \u001b[0;32mNone\u001b[0m \u001b[0;32mand\u001b[0m \u001b[0mtime\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mtime\u001b[0m\u001b[0;34m(\u001b[0m\u001b[0;34m)\u001b[0m \u001b[0;34m>\u001b[0m \u001b[0mstart\u001b[0m \u001b[0;34m+\u001b[0m \u001b[0mtimeout\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n", | |
| "\u001b[0;32m/usr/local/lib/python3.8/dist-packages/openai/api_resources/abstract/engine_api_resource.py\u001b[0m in \u001b[0;36mcreate\u001b[0;34m(cls, api_key, api_base, api_type, request_id, api_version, organization, **params)\u001b[0m\n\u001b[1;32m 113\u001b[0m )\n\u001b[1;32m 114\u001b[0m \u001b[0murl\u001b[0m \u001b[0;34m=\u001b[0m \u001b[0mcls\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mclass_url\u001b[0m\u001b[0;34m(\u001b[0m\u001b[0mengine\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mapi_type\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mapi_version\u001b[0m\u001b[0;34m)\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[0;32m--> 115\u001b[0;31m response, _, api_key = requestor.request(\n\u001b[0m\u001b[1;32m 116\u001b[0m \u001b[0;34m\"post\"\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 117\u001b[0m \u001b[0murl\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n", | |
| "\u001b[0;32m/usr/local/lib/python3.8/dist-packages/openai/api_requestor.py\u001b[0m in \u001b[0;36mrequest\u001b[0;34m(self, method, url, params, headers, files, stream, request_id, request_timeout)\u001b[0m\n\u001b[1;32m 179\u001b[0m \u001b[0mrequest_timeout\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0mrequest_timeout\u001b[0m\u001b[0;34m,\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 180\u001b[0m )\n\u001b[0;32m--> 181\u001b[0;31m \u001b[0mresp\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mgot_stream\u001b[0m \u001b[0;34m=\u001b[0m \u001b[0mself\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0m_interpret_response\u001b[0m\u001b[0;34m(\u001b[0m\u001b[0mresult\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mstream\u001b[0m\u001b[0;34m)\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[0m\u001b[1;32m 182\u001b[0m \u001b[0;32mreturn\u001b[0m \u001b[0mresp\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mgot_stream\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mself\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mapi_key\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 183\u001b[0m \u001b[0;34m\u001b[0m\u001b[0m\n", | |
| "\u001b[0;32m/usr/local/lib/python3.8/dist-packages/openai/api_requestor.py\u001b[0m in \u001b[0;36m_interpret_response\u001b[0;34m(self, result, stream)\u001b[0m\n\u001b[1;32m 394\u001b[0m \u001b[0;32melse\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 395\u001b[0m return (\n\u001b[0;32m--> 396\u001b[0;31m self._interpret_response_line(\n\u001b[0m\u001b[1;32m 397\u001b[0m \u001b[0mresult\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mcontent\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mresult\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mstatus_code\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mresult\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mheaders\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mstream\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0;32mFalse\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 398\u001b[0m ),\n", | |
| "\u001b[0;32m/usr/local/lib/python3.8/dist-packages/openai/api_requestor.py\u001b[0m in \u001b[0;36m_interpret_response_line\u001b[0;34m(self, rbody, rcode, rheaders, stream)\u001b[0m\n\u001b[1;32m 427\u001b[0m \u001b[0mstream_error\u001b[0m \u001b[0;34m=\u001b[0m \u001b[0mstream\u001b[0m \u001b[0;32mand\u001b[0m \u001b[0;34m\"error\"\u001b[0m \u001b[0;32min\u001b[0m \u001b[0mresp\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mdata\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 428\u001b[0m \u001b[0;32mif\u001b[0m \u001b[0mstream_error\u001b[0m \u001b[0;32mor\u001b[0m \u001b[0;32mnot\u001b[0m \u001b[0;36m200\u001b[0m \u001b[0;34m<=\u001b[0m \u001b[0mrcode\u001b[0m \u001b[0;34m<\u001b[0m \u001b[0;36m300\u001b[0m\u001b[0;34m:\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[0;32m--> 429\u001b[0;31m raise self.handle_error_response(\n\u001b[0m\u001b[1;32m 430\u001b[0m \u001b[0mrbody\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mrcode\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mresp\u001b[0m\u001b[0;34m.\u001b[0m\u001b[0mdata\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mrheaders\u001b[0m\u001b[0;34m,\u001b[0m \u001b[0mstream_error\u001b[0m\u001b[0;34m=\u001b[0m\u001b[0mstream_error\u001b[0m\u001b[0;34m\u001b[0m\u001b[0;34m\u001b[0m\u001b[0m\n\u001b[1;32m 431\u001b[0m )\n", | |
| "\u001b[0;31mInvalidRequestError\u001b[0m: This model's maximum context length is 4097 tokens, however you requested 16123 tokens (15623 in your prompt; 500 for the completion). Please reduce your prompt; or completion length." | |
| ] | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Depending on the length of the extracted section, the `create()` method might throw an error informing us about exceeding the maximum input token length. In other words, GPT is only able to handle a fixed maximum number of input (and output) tokens.\n", | |
| "\n", | |
| "To ensure that we don’t exceed the maximum input length, we split the extracted section into multiple text chunks, summarize each chunk independently and finally merge all summarized chunks using a simple `.join()` function.\n", | |
| "\n", | |
| "Depending on the model used, requests can use up to 4097 tokens shared between prompt and completion. If your prompt is 4000 tokens, your completion can be 97 tokens at most ([see details here](https://help.openai.com/en/articles/4936856-what-are-tokens-and-how-to-count-them))." | |
| ], | |
| "metadata": { | |
| "id": "RajroX4w1gG4" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Given the token-to-word ratio below, we can send approximately 2900 words to GPT assuming a 5 sentence summary per section chunk.\n", | |
| "\n", | |
| "- Max tokens per request: 4000 tokens (leaving 97 tokens as a safety buffer) = 3000 words\n", | |
| "- Max prompt tokens: “Summarize the following text in five sentences” has 7 words = 10 tokens\n", | |
| "- Max tokens of returned summary (5 sentences): 20 words per sentence. 5 * 20 = 100 words = 133 tokens\n", | |
| "- Max tokens of section chunk: 4000-10-133 = 3857 tokens = 2900 words" | |
| ], | |
| "metadata": { | |
| "id": "0eaza9j71pUY" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "" | |
| ], | |
| "metadata": { | |
| "id": "lS78CwzE1sUA" | |
| } | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "We can choose from a plethora of strategies to split up the section into smaller chunks. The simplest approach is creating a single list of all words by splitting the entire section on whitespaces, and then creating buckets of words with words evenly distributed across all buckets. The downside is that we are likely to split a sentence half-way through and lose the meaning of the sentence because GPT ends up summarizing the first half of the sentence independently from the second half — ignoring any relations between the two chunks. Other options include tokenizers such as SentencePiece and spaCy’s sentence splitter.\n", | |
| "\n", | |
| "Choosing the later generates the most stable results. The example splits the text “My first birthday was great. My 2. was even better.” into a list of two sentences." | |
| ], | |
| "metadata": { | |
| "id": "0uAuWDub1wQ5" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "!python -m spacy download en_core_web_sm" | |
| ], | |
| "metadata": { | |
| "id": "SCjGd6svkrQp" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "import spacy\n", | |
| "from spacy.lang.en import English\n", | |
| "\n", | |
| "nlp = spacy.load('en_core_web_sm')\n", | |
| "\n", | |
| "text = 'My first birthday was great. My 2. was even better.'\n", | |
| " \n", | |
| "for i in nlp(text).sents:\n", | |
| " print(i)" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/" | |
| }, | |
| "id": "Z5p672JQyPub", | |
| "outputId": "b851169a-0ed5-46fc-e875-3debc19237db" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "stream", | |
| "name": "stderr", | |
| "text": [ | |
| "/usr/local/lib/python3.8/dist-packages/torch/cuda/__init__.py:497: UserWarning: Can't initialize NVML\n", | |
| " warnings.warn(\"Can't initialize NVML\")\n" | |
| ] | |
| }, | |
| { | |
| "output_type": "stream", | |
| "name": "stdout", | |
| "text": [ | |
| "My first birthday was great.\n", | |
| "My 2. was even better.\n" | |
| ] | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "spaCy correctly detected the second sentence instead of splitting it after the “2.”. Now, let’s write a `text_to_chunks` helper function to generate lists of sentences where each list holds at most 2700 words. 2900 words was the initially calculated word limit, but we want to ensure to have enough buffer for words that are longer than 1.33 tokens." | |
| ], | |
| "metadata": { | |
| "id": "_hawX9bN1z6D" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "def text_to_chunks(text):\n", | |
| " chunks = [[]]\n", | |
| " chunk_total_words = 0\n", | |
| "\n", | |
| " sentences = nlp(text)\n", | |
| "\n", | |
| " for sentence in sentences.sents:\n", | |
| " # print(dir(sentence))\n", | |
| " chunk_total_words += len(sentence.text.split(\" \"))\n", | |
| "\n", | |
| " if chunk_total_words > 2700:\n", | |
| " chunks.append([])\n", | |
| " chunk_total_words = len(sentence.text.split(\" \"))\n", | |
| "\n", | |
| " chunks[len(chunks)-1].append(sentence.text)\n", | |
| " \n", | |
| " return chunks\n", | |
| "\n", | |
| "chunks = text_to_chunks(section_text)\n", | |
| "\n", | |
| "print(chunks)" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/" | |
| }, | |
| "id": "uUl4TMC71XWQ", | |
| "outputId": "c5fc0d35-05c7-401b-da53-0732f1aff121" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "stream", | |
| "name": "stdout", | |
| "text": [ | |
| "[[' ITEM 1A.', 'RISK FACTORS\\n\\nYou should carefully consider the risks described below together with the other information set forth in this report, which could materially affect our business, financial condition and future results.', 'The risks described below are not the only risks facing our company.', 'Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and operating results.', '\\n\\n', 'Risks Related to Our Ability to Grow Our Business\\n\\nWe may be impacted by macroeconomic conditions resulting from the global COVID-19 pandemic.\\n\\n', 'Since the first quarter of 2020, there has been a worldwide impact from the COVID-19 pandemic.', 'Government regulations and shifting social behaviors have limited or closed non-essential transportation, government functions, business activities and person-to-person interactions.', 'In some cases, the relaxation of such trends has recently been followed by actual or contemplated returns to stringent restrictions on gatherings or commerce, including in parts of the U.S. and a number of areas in Europe.', '\\n\\n', 'We temporarily suspended operations at each of our manufacturing facilities worldwide for a part of the first half of 2020.', 'Some of our suppliers and partners also experienced temporary suspensions before resuming, including Panasonic, which manufactures battery cells for our products at our Gigafactory Nevada.', 'We also instituted temporary employee furloughs and compensation reductions while our U.S. operations were scaled back.', 'Reduced operations or closures at motor vehicle departments, vehicle auction houses and municipal and utility company inspectors have resulted in challenges in or postponements for our new vehicle deliveries, used vehicle sales and energy product deployments.', 'Global trade conditions and consumer trends may further adversely impact us and our industries.', 'For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional expenses to expedite delivery of critical parts.', 'Similarly, increased demand for personal electronics has created a shortfall of microchip supply, and it is yet unknown how we may be impacted.', 'Sustaining our production trajectory will require the readiness and solvency of our suppliers and vendors, a stable and motivated production workforce and ongoing government cooperation, including for travel and visa allowances.', 'The contingencies inherent in the construction of and ramp at new facilities such as Gigafactory Shanghai, Gigafactory Berlin and Gigafactory Texas may be exacerbated by these challenges.', '\\n\\n', 'We cannot predict the duration or direction of current global trends, the sustained impact of which is largely unknown, is rapidly evolving and has varied across geographic regions.', 'Ultimately, we continue to monitor macroeconomic conditions to remain flexible and to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally and deploy our production, workforce and other resources accordingly.', 'If current global market conditions continue or worsen, or if we cannot or do not maintain operations at a scope that is commensurate with such conditions or are later required to or choose to suspend such operations again, our business, prospects, financial condition and operating results may be harmed.', '\\n\\n', 'We may experience delays in launching and ramping the production of our products and features, or we may be unable to control our manufacturing costs.\\n\\n', 'We have previously experienced and may in the future experience launch and production ramp delays for new products and features.', 'For example, we encountered unanticipated supplier issues that led to delays during the ramp of Model X and experienced challenges with a supplier and with ramping full automation for certain of our initial Model 3 manufacturing processes.', 'In addition, we may introduce in the future new or unique manufacturing processes and design features for our products.', 'There is no guarantee that we will be able to successfully and timely introduce and scale such processes or features.', '\\n\\n', 'In particular, our future business depends in large part on increasing the production of mass-market vehicles including Model 3 and Model Y, which we are planning to achieve through multiple factories worldwide.', 'We have relatively limited experience to date in manufacturing Model 3 and Model Y at high volumes and even less experience building and ramping vehicle production lines across multiple factories in different geographies.', 'In order to be successful, we will need to implement, maintain and ramp efficient and cost-effective manufacturing capabilities, processes and supply chains and achieve the design tolerances, high quality and output rates we have planned at our manufacturing facilities in California, Nevada, Texas, China and Germany.', 'We will also need to hire, train and compensate skilled employees to operate these facilities.', 'Bottlenecks and other unexpected challenges such as those we experienced in the past may arise during our production ramps, and we must address them promptly while continuing to improve manufacturing processes and reducing costs.', 'If we are not successful in achieving these goals, we could face delays in establishing and/or sustaining our Model 3 and Model Y ramps or be unable to meet our related cost and profitability targets.', '\\n\\n', 'We may also experience similar future delays in launching and/or ramping production of our energy storage products and Solar Roof; new product versions or variants; new vehicles such as Tesla Semi, Cybertruck and the new Tesla Roadster; and future features and services such as new Autopilot or FSD features and the autonomous Tesla ride-hailing network.', 'Likewise, we may encounter delays with the design, construction and regulatory or other approvals necessary to build and bring online future manufacturing facilities and products.', '\\n\\n \\n\\nAny delay or other complication in ramping the production of our current products or the development, manufacture, launch and production ramp of our future products, features and services, or in doing so cost-effectively and with high quality, may harm our brand, business, prospects, financial condition and operating results.', '\\n\\n', 'We may be unable to grow our global product sales, delivery and installation capabilities and our servicing and vehicle charging networks, or we may be unable to accurately project and effectively manage our growth.\\n\\n', 'Our success will depend on our ability to continue to expand our sales capabilities .', 'We also frequently adjust our retail operations and product offerings in order to optimize our reach, costs, product line-up and model differentiation and customer experience.', 'However, there is no guarantee that such steps will be accepted by consumers accustomed to traditional sales strategies.', 'For example, marketing methods such as touchless test drives that we have pioneered in certain markets have not been proven at scale.', 'We are targeting with Model 3 and Model Y a global mass demographic with a broad range of potential customers, in which we have relatively limited experience projecting demand and pricing our products.', 'We currently produce numerous international variants at a limited number of factories, and if our specific demand expectations for these variants prove inaccurate, we may not be able to timely generate deliveries matched to the vehicles that we produce in the same timeframe or that are commensurate with the size of our operations in a given region.', 'Likewise, as we develop and grow our energy products and services worldwide, our success will depend on our ability to correctly forecast demand in various markets.', '\\n\\n', 'Because we do not have independent dealer networks, we are responsible for delivering all of our vehicles to our customers.', 'While we have improved our delivery logistics, we may face difficulties with deliveries at increasing volumes, particularly in international markets requiring significant transit times.', 'For example, we saw challenges in ramping our logistics channels in China and Europe to initially deliver Model 3 there in the first quarter of 2019.', 'We have deployed a number of delivery models, such as deliveries to customers’ homes and workplaces and touchless deliveries, but there is no guarantee that such models will be scalable or be accepted globally.', 'Likewise, as we ramp Solar Roof, we are working to substantially increase installation personnel and decrease installation times.', 'If we are not successful in matching such capabilities with actual production, or if we experience unforeseen production delays or inaccurately forecast demand for the Solar Roof, our business, financial condition and operating results may be harmed.', '\\n\\n', 'Moreover, because of our unique expertise with our vehicles, we recommend that our vehicles be serviced by us or by certain authorized professionals.', 'If we experience delays in adding such servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, particularly higher-volume and newer additions to our fleet such as Model 3 and Model Y, it could overburden our servicing capabilities and parts inventory.', 'Similarly, the increasing number of Tesla vehicles also requires us to continue to rapidly increase the number of our Supercharger stations and connectors throughout the world.', '\\n\\n', 'There is no assurance that we will be able to ramp our business to meet our sales, delivery, installation, servicing and vehicle charging targets globally, that our projections on which such targets are based will prove accurate or that the pace of growth or coverage of our customer infrastructure network will meet customer expectations.', 'These plans require significant cash investments and management resources and there is no guarantee that they will generate additional sales or installations of our products, or that we will be able to avoid cost overruns or be able to hire additional personnel to support them.', 'As we expand, w e will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the sale, installation and servicing of our products, the sale or dispatch of electricity related to our energy products and the operation of Superchargers.', 'If we fail to manage our growth effectively, it may harm our brand, business, prospects, financial condition and operating results.\\n\\n', 'Our future growth and success are dependent upon consumers’ demand for electric vehicles and specifically our vehicles in an automotive industry that is generally competitive, cyclical and volatile.', '\\n\\n', 'If the market for electric vehicles in general and Tesla vehicles in particular does not develop as we expect, develops more slowly than we expect, or if demand for our vehicles decreases in our markets or our vehicles compete with each other, our business, prospects, financial condition and operating results may be harmed.', '\\n\\n', 'We are still at an earlier stage and have limited resources and production relative to established competitors that offer internal combustion engine vehicles.', 'In addition, electric vehicles still comprise a small percentage of overall vehicle sales.', 'As a result, the market for our vehicles could be negatively affected by numerous factors, such as: \\n\\n  \\n\\n• \\n\\nperceptions about electric vehicle features, quality, safety, performance and cost; \\n\\n\\n\\n  \\n\\n• \\n\\nperceptions about the limited range over which electric vehicles may be driven on a single battery charge, and access to charging facilities; \\n\\n\\n\\n  \\n\\n• \\n\\ncompetition, including from other types of alternative fuel vehicles, plug-in hybrid electric vehicles and high fuel-economy internal combustion engine vehicles; \\n\\n\\n\\n  \\n\\n• \\n\\nvolatility in the cost of oil and gasoline, such as wide fluctuations in crude oil prices during 2020; \\n\\n\\n\\n \\n\\n  \\n\\n• \\n\\ngovernment regulations and economic incentives; and \\n\\n\\n\\n  \\n\\n• \\n\\nconcerns about our future viability.', '\\n\\n\\n\\n', 'Finally, the target demographics for our vehicles, particularly Model 3 and Model Y, are highly competitive.', 'Sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose us to further volatility as we expand and adjust our operations and retail strategies.', 'Moreover, the COVID-19 pandemic may negatively impact the transportation and automotive industries long-term.', 'It is uncertain as to how such macroeconomic factors will impact us as a company that has been experiencing growth and increasing market share in an industry that has globally been experiencing a recent decline in sales.\\n\\n', 'Our suppliers may fail to deliver components according to schedules, prices, quality and volumes that are acceptable to us, or we may be unable to manage these components effectively.\\n\\n', 'Our products contain thousands of parts that we purchase globally from hundreds of mostly single-source direct suppliers, generally without long-term supply agreements.', 'This exposes us to multiple potential sources of component shortages, such as those that we experienced in 2012 and 2016 with our Model S and Model X ramps.', 'Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters such as the March 2011 earthquakes in Japan, health epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’ control could also affect these suppliers’ ability to deliver components to us or to remain solvent and operational.', 'For example, a global shortage of microchips has been reported since early 2021, and the impact to us is yet unknown.', 'The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools for producing and supporting our products.', 'Moreover, significant increases in our production, such as for Model 3 and Model Y, or product design changes by us have required and may in the future require us to procure additional components in a short amount of time.', 'Our suppliers may not be willing or able to sustainably meet our timelines or our cost, quality and volume needs, or to do so may cost us more, which may require us to replace them with other sources.', 'Finally, we have limited vehicle manufacturing experience outside of the Fremont Factory and we may experience issues increasing the level of localized procurement at our Gigafactory Shanghai and at future factories such as Gigafactory Berlin and Gigafactory Texas.', 'While we believe that we will be able to secure additional or alternate sources or develop our own replacements for most of our components, there is no assurance that we will be able to do so quickly or at all.', 'Additionally, we may be unsuccessful in our continuous efforts to negotiate with existing suppliers to obtain cost reductions and avoid unfavorable changes to terms, source less expensive suppliers for certain parts and redesign certain parts to make them less expensive to produce.', 'Any of these occurrences may harm our business, prospects, financial condition and operating results.\\n\\n', 'As the scale of our vehicle production increases, we will also need to accurately forecast, purchase, warehouse and transport components at high volumes to our manufacturing facilities and servicing locations internationally.', 'If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management and other systems to accommodate the increased complexity in our supply chain and parts management, we may incur unexpected production disruption, storage, transportation and write-off costs, which may harm our business and operating results.\\n\\n', 'We may be unable to meet our projected construction timelines, costs and production ramps at new factories, or we may experience difficulties in generating and maintaining demand for products manufactured there. \\n\\n', 'Our ability to increase production of our vehicles on a sustained basis, make them affordable globally by accessing local supply chains and workforces and streamline delivery logistics is dependent on the construction and ramp of Gigafactory Shanghai, Gigafactory Berlin and Gigafactory Texas.', 'The construction of and commencement and ramp of production at these factories are subject to a number of uncertainties inherent in all new manufacturing operations, including ongoing compliance with regulatory requirements, procurement and maintenance of construction, environmental and operational licenses and approvals for additional expansion, potential supply chain constraints, hiring, training and retention of qualified employees and the pace of bringing production equipment and processes online with the capability to manufacture high-quality units at scale.', 'For example, we are currently constructing Gigafactory Berlin under conditional permits.', 'Moreover, we intend to incorporate sequential design and manufacturing changes into vehicles manufactured at each new factory.', 'We have limited experience to date with developing and implementing vehicle manufacturing innovations outside of the Fremont Factory, as we only recently began production at Gigafactory Shanghai.', 'In particular, the majority of our design and engineering resources are currently located in California.', 'In order to meet our expectations for our new factories, we must expand and manage localized design and engineering talent and resources.'], ['If we experience any issues or delays in meeting our projected timelines, costs, capital efficiency and production capacity for our new factories, expanding and managing teams to implement iterative design and production changes there, maintaining and complying with the terms of any debt financing that we obtain to fund them or generating and maintaining demand for the vehicles we manufacture there, our business, prospects, operating results and financial condition may be harmed.', '\\n\\n \\n\\nWe will need to maintain and significantly grow our access to battery cells, including through the development and manufacture of our own cells, and control our related costs.', '\\n\\n', 'We are dependent on the continued supply of lithium-ion battery cells for our vehicles and energy storage products, and we will require substantially more cells to grow our business according to our plans.', 'Currently, we rely on suppliers such as Panasonic for these cells.', 'However, we have to date fully qualified only a very limited number of such suppliers and have limited flexibility in changing suppliers.', 'Any disruption in the supply of battery cells from our suppliers could limit production of our vehicles and energy storage products.', 'In the long term, we intend to supplement cells from our suppliers with cells manufactured by us, which we believe will be more efficient, manufacturable at greater volumes and cost-effective than currently available cells.', 'However, our efforts to develop and manufacture such battery cells have required and may require significant investments, and there can be no assurance that we will be able to achieve these targets in the timeframes that we have planned or at all.', 'If we are unable to do so, we may have to curtail our planned vehicle and energy storage product production or procure additional cells from suppliers at potentially greater costs, either of which may harm our business and operating results.', '\\n\\n', 'In addition, the cost of battery cells, whether manufactured by our suppliers or by us, depends in part upon the prices and availability of raw materials such as lithium, nickel, cobalt and/or other metals.', 'The prices for these materials fluctuate and their available supply may be unstable, depending on market conditions and global demand for these materials, including as a result of increased global production of electric vehicles and energy storage products.', 'Any reduced availability of these materials may impact our access to cells and any increases in their prices may reduce our profitability if we cannot recoup the increased costs through increased vehicle prices.', 'Moreover, any such attempts to increase product prices may harm our brand, prospects and operating results.\\n\\n', 'We face strong competition for our products and services from a growing list of established and new competitors.', '\\n\\n', 'The worldwide automotive market is highly competitive today and we expect it will become even more so in the future.', 'For example, Model 3 and Model Y face competition from existing and future automobile manufacturers in the extremely competitive entry-level premium sedan and compact SUV markets.', 'A significant and growing number of established and new automobile manufacturers, as well as other companies, have entered or are reported to have plans to enter the market for electric and other alternative fuel vehicles, including hybrid, plug-in hybrid and fully electric vehicles, as well as the market for self-driving technology and other vehicle applications and software platforms.', 'In some cases, our competitors offer or will offer electric vehicles in important markets such as China and Europe, and/or have announced an intention to produce electric vehicles exclusively at some point in the future.', 'Many of our competitors have significantly greater or better-established resources than we do to devote to the design, development, manufacturing, distribution, promotion, sale and support of their products.', 'Increased competition could result in our lower vehicle unit sales, price reductions, revenue shortfalls, loss of customers and loss of market share, which may harm our business, financial condition and operating results.\\n\\n', 'We also face competition in our energy generation and storage business from other manufacturers, developers, installers and service providers of competing energy systems, as well as from large utilities.', 'Decreases in the retail or wholesale prices of electricity from utilities or other renewable energy sources could make our products less attractive to customers and lead to an increased rate of residential customer defaults under our existing long-term leases and PPAs. \\n\\n \\n\\nRisks Related to Our Operations\\n\\nWe may experience issues with lithium-ion cells or other components manufactured at Gigafactory Nevada, which may harm the production and profitability of our vehicle and energy storage products.\\n\\n', 'Our plan to grow the volume and profitability of our vehicles and energy storage products depends on significant lithium-ion battery cell production by our partner Panasonic at Gigafactory Nevada.', 'Although Panasonic has a long track record of producing high-quality cells at significant volume at its factories in Japan, it has relatively limited experience with cell production at Gigafactory Nevada , which began in 2017.', 'Moreover, although Panasonic is co-located with us at Gigafactory Nevada, it is free to make its own operational decisions, such as its determination to temporarily suspend its manufacturing there in response to the COVID-19 pandemic.', 'In addition, we produce several vehicle components, such as battery modules and packs incorporating the cells produced by Panasonic for Model 3 and Model Y and drive units (including to support Gigafactory Shanghai production), at Gigafactory Nevada, and we also manufacture energy storage products there.', 'In the past, some of the manufacturing lines for certain product components took longer than anticipated to ramp to their full capacity, and additional bottlenecks may arise in the future as we continue to increase the production rate and introduce new lines.', 'If we or Panasonic are unable to or otherwise do not maintain and grow our respective operations at Gigafactory Nevada production, or if we are unable to do so cost-effectively or hire and retain highly-skilled personnel there, our ability to manufacture our products profitably would be limited, which may harm our business and operating results.\\n\\n', 'Finally, the high volumes of lithium-ion cells and battery modules and packs manufactured at Gigafactory Nevada are stored and recycled at our various facilities.', 'Any mishandling of battery cells may cause disruption to the operation of such facilities.', 'While \\n\\n \\n\\nwe have implemented safety procedures related to the handling of the cells, there can be no assurance that a safety issue or fire related to the cells would not disrupt our operations .', 'Any such disruptions or issues may harm our brand and business.', '\\n\\n', 'We face risks associated with maintaining and expanding our international operations, including unfavorable and uncertain regulatory, political, economic, tax and labor conditions.\\n\\n', 'We are subject to legal and regulatory requirements, political uncertainty and social, environmental and economic conditions in numerous jurisdictions, over which we have little control and which are inherently unpredictable.', 'Our operations in such jurisdictions, particularly as a company based in the U.S., create risks relating to conforming our products to regulatory and safety requirements and charging and other electric infrastructures; organizing local operating entities; establishing, staffing and managing foreign business locations; attracting local customers; navigating foreign government taxes, regulations and permit requirements; enforceability of our contractual rights; trade restrictions, customs regulations, tariffs and price or exchange controls; and preferences in foreign nations for domestically manufactured products.', 'Such conditions may increase our costs, impact our ability to sell our products and require significant management attention, and may harm our business if we unable to manage them effectively.\\n\\n', 'Our business may suffer if our products or features contain defects, fail to perform as expected or take longer than expected to become fully functional.\\n\\n', 'If our products contain design or manufacturing defects that cause them not to perform as expected or that require repair, or certain features of our vehicles such as new Autopilot or FSD features take longer than expected to become enabled, are legally restricted or become subject to onerous regulation, our ability to develop, market and sell our products and services may be harmed, and we may experience delivery delays, product recalls, product liability, breach of warranty and consumer protection claims and significant warranty and other expenses .', 'In particular, our products are highly dependent on software, which is inherently complex and may contain latent defects or errors or be subject to external attacks.', 'Issues experienced by our customers have included those related to the Model S and Model X 17-inch display screen, the panoramic roof and the 12-volt battery in the Model S, the seats and doors in the Model X and the operation of solar panels installed by us.', 'Although we attempt to remedy any issues we observe in our products as effectively and rapidly as possible, such efforts may not be timely, may hamper production or may not completely satisfy our customers.', 'While we have performed extensive internal testing on our products and features, we currently have a limited frame of reference by which to evaluate their long-term quality, reliability, durability and performance characteristics.', 'There can be no assurance that we will be able to detect and fix any defects in our products prior to their sale to or installation for customers.', '\\n\\n', 'We may be required to defend or insure against product liability claims.\\n\\n', 'The automobile industry generally experiences significant product liability claims, and as such we face the risk of such claims in the event our vehicles do not perform or are claimed to not have performed as expected.', 'As is true for other automakers, our vehicles have been involved and we expect in the future will be involved in accidents resulting in death or personal injury, and such accidents where Autopilot or FSD features are engaged are the subject of significant public attention.', 'We have experienced and we expect to continue to face claims arising from or related to misuse or claimed failures of such new technologies that we are pioneering.', 'In addition, the battery packs that we produce make use of lithium-ion cells.', 'On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells.', 'While we have designed our battery packs to passively contain any single cell’s release of energy without spreading to neighboring cells, there can be no assurance that a field or testing failure of our vehicles or other battery packs that we produce will not occur, in particular due to a high-speed crash.', 'Likewise, as our solar energy systems and energy storage products generate and store electricity, they have the potential to fail or cause injury to people or property.', 'Any product liability claim may subject us to lawsuits and substantial monetary damages, product recalls or redesign efforts, and even a meritless claim may require us to defend it, all of which may generate negative publicity and be expensive and time-consuming.', 'In most jurisdictions, we generally self-insure against the risk of product liability claims for vehicle exposure, meaning that any product liability claims will likely have to be paid from company funds and not by insurance.', '\\n\\n', 'We will need to maintain public credibility and confidence in our long-term business prospects in order to succeed.\\n\\n', 'In order to maintain and grow our business, we must maintain credibility and confidence among customers, suppliers, analysts, investors, ratings agencies and other parties in our long-term financial viability and business prospects.', 'Maintaining such confidence may be challenging due to our limited operating history relative to established competitors; customer unfamiliarity with our products; any delays we may experience in scaling manufacturing, delivery and service operations to meet demand; competition and uncertainty regarding the future of electric vehicles or our other products and services; our quarterly production and sales performance compared with market expectations; and other factors including those over which we have no control.', 'In particular, Tesla’s products, business, results of operations, statements and actions are well-publicized by a range of third parties.', 'Such attention includes frequent criticism, which is often exaggerated or unfounded, such as speculation regarding the sufficiency or stability of our management team.', 'Any such negative perceptions, whether caused by us or not, may harm our business and make it more difficult to raise additional funds if needed.\\n\\n \\n\\nWe may be unable to effectively grow, or manage the compliance, residual value, financing and credit risks related to, our various financing programs.', '\\n\\n', 'We offer financing arrangements for our vehicles in North America, Europe and Asia primarily through various financial institutions.', 'We also currently offer vehicle financing arrangements directly through our local subsidiaries in certain markets.', 'Depending on the country, such arrangements are available for specified models and may include operating leases directly with us under which we typically receive only a very small portion of the total vehicle purchase price at the time of lease, followed by a stream of payments over the term of the lease.', 'We have also offered various arrangements for customers of our solar energy systems whereby they pay us a fixed payment to lease or finance the purchase of such systems or purchase electricity generated by them.', 'If we do not successfully monitor and comply with applicable national, state and/or local financial regulations and consumer protection laws governing these transactions, we may become subject to enforcement actions or penalties.\\n\\n', 'The profitability of any directly-leased vehicles returned to us at the end of their leases depends on our ability to accurately project our vehicles’ residual values at the outset of the leases, and such values may fluctuate prior to the end of their terms depending on various factors such as supply and demand of our used vehicles, economic cycles and the pricing of new vehicles.', 'We have made in the past and may make in the future certain adjustments to our prices from time to time in the ordinary course of business, which may impact the residual values of our vehicles and reduce the profitability of our vehicle leasing program.', 'The funding and growth of this program also relies on our ability to secure adequate financing and/or business partners.', 'If we are unable to adequately fund our leasing program through internal funds, partners or other financing sources, and compelling alternative financing programs are not available for our customers who may expect or need such options, we may be unable to grow our vehicle deliveries.', 'Furthermore, if our vehicle leasing business grows substantially, our business may suffer if we cannot effectively manage the resulting greater levels of residual risk.\\n\\n', 'Similarly, we have provided resale value guarantees to vehicle customers and partners for certain financing programs, under which such counterparties may sell their vehicles back to us at certain points in time at pre-determined amounts.', 'However, actual resale values are subject to fluctuations over the term of the financing arrangements, such as from the vehicle pricing changes discussed above.', 'If the actual resale values of any vehicles resold or returned to us pursuant to these programs are materially lower than the pre-determined amounts we have offered, our financial condition and operating results may be harmed.\\n\\n', 'Finally, our vehicle and solar energy system financing programs and our energy storage sales programs also expose us to customer credit risk.', 'In the event of a widespread economic downturn or other catastrophic event, our customers may be unable or unwilling to satisfy their payment obligations to us on a timely basis or at all.', 'If a significant number of our customers default, we may incur substantial credit losses and/or impairment charges with respect to the underlying assets.', '\\n\\n', 'We must manage ongoing obligations under our agreement with the Research Foundation for the State University of New York relating to our Gigafactory New York.\\n\\n', 'We are party to an operating lease and a research and development agreement through the SUNY Foundation.', 'These agreements provide for the construction and use of our Gigafactory New York, which we have primarily used for the development and production of our Solar Roof and other solar products and components, energy storage components and Supercharger components, and for other lessor-approved functions.'], ['Under this agreement, we are obligated to, among other things, meet employment targets as well as specified minimum numbers of personnel in the State of New York and in Buffalo, New York and spend or incur $5.00 billion in combined capital, operational expenses, costs of goods sold and other costs in the State of New York during the 10-year period beginning April 30, 2018.', 'As we temporarily suspended most of our manufacturing operations at Gigafactory New York pursuant to a New York State executive order issued in March 2020 as a result of the COVID-19 pandemic, we were granted a one-year deferral of our obligation to be compliant with our applicable targets under such agreement on April 30, 2020, which was memorialized in an amendment to our agreement with the SUNY Foundation in July 2020.', 'While we expect to have and grow significant operations at Gigafactory New York and the surrounding Buffalo area, any failure by us in any year over the course of the term of the agreement to meet all applicable future obligations may result in our obligation to pay a “program payment” of $41 million to the SUNY Foundation for such year, the termination of our lease at Gigafactory New York which may require us to pay additional penalties and/or the need to adjust certain of our operations, in particular our production ramp of the Solar Roof or other components.', 'Any of the foregoing events may harm our business, financial condition and operating results.\\n\\n', 'If we are unable to attract, hire and retain key employees and qualified personnel, our ability to compete may be harmed.\\n\\n', 'The loss of the services of any of our key employees or any significant portion of our workforce could disrupt our operations or delay the development, introduction and ramp of our products and services.', 'In particular, we are highly dependent on the services of Elon Musk, our Chief Executive Officer.', 'None of our key employees is bound by an employment agreement for any specific term and we may not be able to successfully attract and retain senior leadership necessary to grow our business.', 'Our future success also depends upon our ability to attract, hire and retain a large number of engineering, manufacturing, marketing, sales and delivery, service, installation, technology and support personnel, especially to support our planned high-volume product sales, market and geographical \\n\\n \\n\\nexpansion and technological innovation s .', 'Recruiting efforts, particularly for senior employees, may be time-consuming, which may delay the execution of our plans.', 'If we are not successful in managing these risks, our business, financial condition and operating results may be harmed.', '\\n\\n', 'Employees may leave Tesla or choose other employers over Tesla due to various factors, such as a very competitive labor market for talented individuals with automotive or technology experience, or any negative publicity related to us.', 'In California, Nevada and other regions where we have operations, there is increasing competition for individuals with skillsets needed for our business, including specialized knowledge of electric vehicles, software engineering, manufacturing engineering and electrical and building construction expertise.', 'Moreover, we may be impacted by perceptions relating to reductions in force that we have conducted in the past in order to optimize our organizational structure and reduce costs and the departure of certain senior personnel for various reasons.', 'Likewise, as a result of our temporary suspension of various U.S. manufacturing operations in the first half of 2020, in April 2020 we temporarily furloughed certain hourly employees and reduced most salaried employees’ base salaries.', 'We also compete with both mature and prosperous companies that have far greater financial resources than we do and start-ups and emerging companies that promise short-term growth opportunities.', '\\n\\n', 'Finally, our compensation philosophy for all of our personnel reflects our startup origins, with an emphasis on equity-based awards and benefits in order to closely align their incentives with the long-term interests of our stockholders.', 'We periodically seek and obtain approval from our stockholders for future increases to the number of awards available under our equity incentive and employee stock purchase plans.', 'If we are unable to obtain the requisite stockholder approvals for such future increases, we may have to expend additional cash to compensate our employees and our ability to retain and hire qualified personnel may be harmed.\\n\\n', 'We are highly dependent on the services of Elon Musk, our Chief Executive Officer.\\n\\n', 'We are highly dependent on the services of Elon Musk, our Chief Executive Officer and largest stockholder.', 'Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla.', 'Mr. Musk also currently serves as Chief Executive Officer and Chief Technical Officer of Space Exploration Technologies Corp., a developer and manufacturer of space launch vehicles, and is involved in other emerging technology ventures.', '\\n\\n', 'We must manage risks relating to our information technology systems and the threat of intellectual property theft, data breaches and cyber-attacks.', '\\n\\n', 'We must continue to expand and improve our information technology systems as our operations grow, such as product data management, procurement, inventory management, production planning and execution, sales, service and logistics, dealer management, financial, tax and regulatory compliance systems.', 'This includes the implementation of new internally developed systems and the deployment of such systems in the U.S. and abroad.', 'We must also continue to maintain information technology measures designed to protect us against intellectual property theft, data breaches, sabotage and other external or internal cyber-attacks or misappropriation.', 'However, the implementation, maintenance, segregation and improvement of these systems require significant management time, support and cost, and there are inherent risks associated with developing, improving and expanding our core systems as well as implementing new systems and updating current systems, including disruptions to the related areas of business operation.', 'These risks may affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver and service products, adequately protect our intellectual property or achieve and maintain compliance with, or realize available benefits under, tax laws and other applicable regulations.', '\\n\\n', 'Moreover, if we do not successfully implement, maintain or expand these systems as planned, our operations may be disrupted, our ability to accurately and/or timely report our financial results could be impaired and deficiencies may arise in our internal control over financial reporting, which may impact our ability to certify our financial results.', 'Moreover, our proprietary information or intellectual property could be compromised or misappropriated and our reputation may be adversely affected.', 'If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.\\n\\n', 'Any unauthorized control or manipulation of our products’ systems could result in loss of confidence in us and our products.\\n\\n', 'Our products contain complex information technology systems.', 'For example, our vehicles and energy storage products are designed with built-in data connectivity to accept and install periodic remote updates from us to improve or update their functionality.', 'While we have implemented security measures intended to prevent unauthorized access to our information technology networks, our products and their systems, malicious entities have reportedly attempted, and may attempt in the future, to gain unauthorized access to modify, alter and use such networks, products and systems to gain control of, or to change, our products’ functionality, user interface and performance characteristics or to gain access to data stored in or generated by our products.', 'We encourage reporting of potential vulnerabilities in the security of our products through our security vulnerability reporting policy, and we aim to remedy any reported and verified vulnerability.', 'However, there can be no assurance that any vulnerabilities will not be exploited before they can be identified, or that our remediation efforts are or will be successful.\\n\\n \\n\\nAny unauthorized access to or control of our products or their systems or any loss of data could result in legal claims or government investigations .', 'In addition, regardless of their veracity, reports of unauthorized access to our products, their systems or data, as well as other factors that may result in the perception that our products, their systems or data are capable of being hacked, may harm our brand, prospects and operating results.', 'We have been the subject of such reports in the past.', '\\n\\n', 'Our business may be adversely affected by any disruptions caused by union activities.', '\\n\\n', 'It is not uncommon for employees of certain trades at companies such as us to belong to a union, which can result in higher employee costs and increased risk of work stoppages.', 'Moreover, regulations in some jurisdictions outside of the U.S. mandate employee participation in industrial collective bargaining agreements and work councils with certain consultation rights with respect to the relevant companies’ operations.', 'Although we work diligently to provide the best possible work environment for our employees, they may still decide to join or seek recognition to form a labor union, or we may be required to become a union signatory.', 'From time to time, labor unions have engaged in campaigns to organize certain of our operations, as part of which such unions have filed unfair labor practice charges against us with the National Labor Relations Board, and they may do so in the future.', 'In September 2019, an administrative law judge issued a recommended decision for Tesla on certain issues and against us on certain others.', 'The National Labor Relations Board has not yet adopted the recommendation and we have appealed certain aspects of the recommended decision.', 'Any unfavorable ultimate outcome for Tesla may have a negative impact on the perception of Tesla’s treatment of our employees.', 'Furthermore, we are directly or indirectly dependent upon companies with unionized work forces, such as suppliers and trucking and freight companies.', 'Any work stoppages or strikes organized by such unions could delay the manufacture and sale of our products and may harm our business and operating results.\\n\\n', 'We may choose to or be compelled to undertake product recalls or take other similar actions.', '\\n\\nAs a manufacturing company, we must manage the risk of product recalls with respect to our products.', 'Recalls for our vehicles have resulted from, for example, industry-wide issues with airbags from a particular supplier, concerns of corrosion in Model S and Model X power steering assist motor bolts, certain suspension failures in Model S and Model X and issues with Model S and Model X media control units.', 'In addition to recalls initiated by us for various causes, testing of or investigations into our products by government regulators or industry groups may compel us to initiate product recalls or may result in negative public perceptions about the safety of our products, even if we disagree with the defect determination or have data that shows the actual safety risk to be non-existent.', 'In the future, we may voluntarily or involuntarily initiate recalls if any of our products are determined by us or a regulator to contain a safety defect or be noncompliant with applicable laws and regulations, such as U.S. federal motor vehicle safety standards.', 'Such recalls, whether voluntary or involuntary or caused by systems or components engineered or manufactured by us or our suppliers, could result in significant expense, supply chain complications and service burdens, and may harm our brand, business, prospects, financial condition and operating results.\\n\\n', 'Our current and future warranty reserves may be insufficient to cover future warranty claims.', '\\n\\n', 'We provide a manufacturer’s warranty on all new and used Tesla vehicles we sell.', 'We also provide certain warranties with respect to the energy generation and storage systems we sell, including on their installation and maintenance, and for components not manufactured by us, we generally pass through to our customers the applicable manufacturers’ warranties.', 'As part of our energy generation and storage system contracts, we may provide the customer with performance guarantees that warrant that the underlying system will meet or exceed the minimum energy generation or other energy performance requirements specified in the contract.', 'Under these performance guarantees, we bear the risk of electricity production or other performance shortfalls, even if they result from failures in components from third party manufacturers.', 'These risks are exacerbated in the event such manufacturers cease operations or fail to honor their warranties.', '\\n\\n', 'If our warranty reserves are inadequate to cover future warranty claims on our products, our financial condition and operating results may be harmed.', 'Warranty reserves include our management’s best estimates of the projected costs to repair or to replace items under warranty, which are based on actual claims incurred to date and an estimate of the nature, frequency and costs of future claims.', 'Such estimates are inherently uncertain and changes to our historical or projected experience, especially with respect to products such as Model 3, Model Y and Solar Roof that we have recently introduced and/or that we expect to produce at significantly greater volumes than our past products, may cause material changes to our warranty reserves in the future.\\n\\n', 'Our insurance coverage strategy may not be adequate to protect us from all business risks.\\n\\n', 'We may be subject, in the ordinary course of business, to losses resulting from products liability, accidents, acts of God and other claims against us, for which we may have no insurance coverage.', 'As a general matter, we do not maintain as much insurance coverage as many other companies do, and in some cases, we do not maintain any at all.', 'Additionally, the policies that we do have may include significant deductibles or self-insured retentions, policy limitations and exclusions, and we cannot be certain that our insurance coverage will be sufficient to cover all future losses or claims against us.', 'A loss that is uninsured or which exceeds policy limits may require us to pay substantial amounts, which may harm our financial condition and operating results.\\n\\n \\n\\nThere is no guarantee that we will have sufficient cash flow from our business to pay our substantial indebtedness or that we will not incur additional indebtedness.', '\\n\\nAs of December 31, 2020, we and our subsidiaries had outstanding $10.57 billion in aggregate principal amount of indebtedness (see Note 12, Debt , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K).', 'Our substantial consolidated indebtedness may increase our vulnerability to any generally adverse economic and industry conditions.', 'We and our subsidiaries may, subject to the limitations in the terms of our existing and future indebtedness, incur additional debt, secure existing or future debt or recapitalize our debt. \\n\\n', 'Holders of convertible senior notes issued by us or our subsidiary may convert such notes at their option prior to the scheduled maturities of the respective convertible senior notes under certain circumstances pursuant to the terms of such notes.', 'Upon conversion of the applicable convertible senior notes, we will be obligated to deliver cash and/or shares pursuant to the terms of such notes.', 'For example, as our stock price has significantly increased recently, we have seen higher levels of early conversions of such “in-the-money” convertible senior notes.', 'Moreover, holders of such convertible senior notes may have the right to require us to repurchase their notes upon the occurrence of a fundamental change pursuant to the terms of such notes.\\n\\n', 'Our ability to make scheduled payments of the principal and interest on our indebtedness when due, to make payments upon conversion or repurchase demands with respect to our convertible senior notes or to refinance our indebtedness as we may need or desire, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.', 'Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our existing indebtedness and any future indebtedness we may incur, and to make necessary capital expenditures.', 'If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive.', 'Our ability to refinance existing or future indebtedness will depend on the capital markets and our financial condition at such time.'], ['In addition, our ability to make payments may be limited by law, by regulatory authority or by agreements governing our future indebtedness.', 'We may not be able to engage in these activities on desirable terms or at all, which may result in a default on our existing or future indebtedness and harm our financial condition and operating results.\\n\\n', 'Our debt agreements contain covenant restrictions that may limit our ability to operate our business.', '\\n\\n', 'The terms of certain of our credit facilities, including our senior asset-based revolving credit agreement, contain, and any of our other future debt agreements may contain, covenant restrictions that limit our ability to operate our business, including restrictions on our ability to, among other things, incur additional debt or issue guarantees, create liens, repurchase stock, or make other restricted payments, and make certain voluntary prepayments of specified debt.', 'In addition, under certain circumstances we are required to comply with a fixed charge coverage ratio.', 'As a result of these covenants, our ability to respond to changes in business and economic conditions and engage in beneficial transactions, including to obtain additional financing as needed, may be restricted.', 'Furthermore, our failure to comply with our debt covenants could result in a default under our debt agreements, which could permit the holders to accelerate our obligation to repay the debt.', 'If any of our debt is accelerated, we may not have sufficient funds available to repay it.\\n\\n', 'Additional funds may not be available to us when we need or want them.\\n\\n', 'Our business and our future plans for expansion are capital-intensive, and the specific timing of cash inflows and outflows may fluctuate substantially from period to period.', 'We may need or want to raise additional funds through the issuance of equity, equity-related or debt securities or through obtaining credit from financial institutions to fund, together with our principal sources of liquidity, the costs of developing and manufacturing our current or future products, to pay any significant unplanned or accelerated expenses or for new significant strategic investments, or to refinance our significant consolidated indebtedness, even if not required to do so by the terms of such indebtedness.', 'We cannot be certain that additional funds will be available to us on favorable terms when required, or at all.', 'If we cannot raise additional funds when we need them, our financial condition, results of operations, business and prospects could be materially and adversely affected.', '\\n\\n', 'We may be negatively impacted by any early obsolescence of our manufacturing equipment.\\n\\n', 'We depreciate the cost of our manufacturing equipment over their expected useful lives.', 'However, product cycles or manufacturing technology may change periodically, and we may decide to update our products or manufacturing processes more quickly than expected.', 'Moreover, improvements in engineering and manufacturing expertise and efficiency may result in our ability to manufacture our products using less of our currently installed equipment.', 'Alternatively, as we ramp and mature the production of our products to higher levels, we may discontinue the use of already installed equipment in favor of different or additional equipment.', 'The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations may be harmed.\\n\\n \\n\\nWe hold and may acquire digital assets that may be subject to volatile market prices, impairmen t and unique risks of loss.', '\\n\\n \\n\\nIn January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity.', 'As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future.', 'Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term.', 'Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.\\n\\n \\n\\nThe prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties.', 'For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable.', 'Moreover, their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence.', 'Finally, the extent to which securities laws or other regulations apply or may apply in the future to such assets is unclear and may change in the future.', 'If we hold digital assets and their values decrease relative to our purchase prices, our financial condition may be harmed.\\n\\n \\n\\nMoreover, digital assets are currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale, which may adversely affect our operating results in any period in which such impairment occurs .', 'Moreover, there is no guarantee that future changes in GAAP will not require us to change the way we account for digital assets held by us. \\n\\n \\n\\nFinally, as intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets.', 'While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed.\\n\\n', 'We are exposed to fluctuations in currency exchange rates.\\n\\n', 'We transact business globally in multiple currencies and have foreign currency risks related to our revenue, costs of revenue, operating expenses and localized subsidiary debt denominated in currencies other than the U.S. dollar, currently primarily the Chinese yuan, euro, Canadian dollar and British pound.', 'To the extent we have significant revenues denominated in such foreign currencies, any strengthening of the U.S. dollar would tend to reduce our revenues as measured in U.S. dollars, as we have historically experienced.', 'In addition, a portion of our costs and expenses have been, and we anticipate will continue to be, denominated in foreign currencies, including the Chinese yuan and Japanese yen.', 'If we do not have fully offsetting revenues in these currencies and if the value of the U.S. dollar depreciates significantly against these currencies, our costs as measured in U.S. dollars as a percent of our revenues will correspondingly increase and our margins will suffer.', 'Moreover, while we undertake limited hedging activities intended to offset the impact of currency translation exposure, it is impossible to predict or eliminate such impact.', 'As a result, our operating results may be harmed.\\n\\n', 'We may need to defend ourselves against intellectual property infringement claims, which may be time-consuming and expensive.', '\\n\\n', 'Our competitors or other third parties may hold or obtain patents, copyrights, trademarks or other proprietary rights that could prevent, limit or interfere with our ability to make, use, develop, sell or market our products and services, which could make it more difficult for us to operate our business.', 'From time to time, the holders of such intellectual property rights may assert their rights and urge us to take licenses and/or may bring suits alleging infringement or misappropriation of such rights, which could result in substantial costs, negative publicity and management attention, regardless of merit.', 'While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or advance our strategic initiatives, there can be no assurance that we will be able to adequately identify and protect the portions of intellectual property that are strategic to our business, or mitigate the risk of potential suits or other legal demands by our competitors.', 'Accordingly, we may consider the entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses.', 'In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease making, selling or incorporating certain components or intellectual property into the goods and services we offer, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative \\n\\n \\n\\nbranding for our products and services.', 'In the event that we are required to take one or more such actions, our brand, business, financial condition and operating results may be harmed.', '\\n\\n', 'Our operations could be adversely affected by events outside of our control, such as natural disasters, wars or health epidemics.\\n\\n', 'We may be impacted by natural disasters, wars, health epidemics or other events outside of our control.', 'For example, our corporate headquarters, the Fremont Factory and Gigafactory Nevada are located in seismically active regions in Northern California and Nevada, and our Gigafactory Shanghai is located in a flood-prone area.', 'If major disasters such as earthquakes, floods or other events occur, or our information system or communications network breaks down or operates improperly, our headquarters and production facilities may be seriously damaged, or we may have to stop or delay production and shipment of our products.', 'In addition, the global COVID-19 pandemic has impacted economic markets, manufacturing operations, supply chains, employment and consumer behavior in nearly every geographic region and industry across the world, and we have been, and may in the future be, adversely affected as a result.', 'We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.\\n\\n', 'Risks Related to Government Laws and Regulations\\n\\nDemand for our products and services may be impacted by the status of government and economic incentives supporting the development and adoption of such products.\\n\\n', 'Government and economic incentives that support the development and adoption of electric vehicles in the U.S. and abroad, including certain tax exemptions, tax credits and rebates, may be reduced, eliminated or exhausted from time to time.', 'For example, a $7,500 federal tax credit that was available in the U.S. for the purchase of our vehicles was reduced in phases during and ultimately ended in 2019.', 'We believe that this sequential phase-out likely pulled forward some vehicle demand into the periods preceding each reduction.', 'Moreover, previously available incentives favoring electric vehicles in areas including Ontario, Canada, Germany, Hong Kong, Denmark and California have expired or were cancelled or temporarily unavailable, and in some cases were not eventually replaced or reinstituted, which may have negatively impacted sales.', 'Any similar developments could have some negative impact on demand for our vehicles, and we and our customers may have to adjust to them.\\n\\n', 'In addition, certain governmental rebates, tax credits and other financial incentives that are currently available with respect to our solar and energy storage product businesses allow us to lower our costs and encourage customers to buy our products and investors to invest in our solar financing funds.', 'However, these incentives may expire when the allocated funding is exhausted, reduced or terminated as renewable energy adoption rates increase, sometimes without warning.', 'For example, the U.S. federal government currently offers certain tax credits for the installation of solar power facilities and energy storage systems that are charged from a co-sited solar power facility; however, these tax credits are currently scheduled to decline and/or expire in 2023 and beyond.', 'Likewise, in jurisdictions where net metering is currently available, our customers receive bill credits from utilities for energy that their solar energy systems generate and export to the grid in excess of the electric load they use.', 'The benefit available under net metering has been or has been proposed to be reduced, altered or eliminated in several jurisdictions, and has also been contested and may continue to be contested before the FERC.', 'Any reductions or terminations of such incentives may harm our business, prospects, financial condition and operating results by making our products less competitive for potential customers, increasing our cost of capital and adversely impacting our ability to attract investment partners and to form new financing funds for our solar and energy storage assets.', '\\n\\n', 'Finally, we and our fund investors claim these U.S. federal tax credits and certain state incentives in amounts based on independently appraised fair market values of our solar and energy storage systems.', 'Nevertheless, the relevant governmental authorities have audited such values and in certain cases have determined that these values should be lower, and they may do so again in the future.', 'Such determinations may result in adverse tax consequences and/or our obligation to make indemnification or other payments to our funds or fund investors.\\n\\n', 'We are subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our operations or products.', '\\n\\n', 'As we grow our manufacturing operations in additional regions, we are or will be subject to complex environmental, manufacturing, health and safety laws and regulations at numerous jurisdictional levels in the U.S., China, Germany and other locations abroad, including laws relating to the use, handling, storage, recycling, disposal and/or human exposure to hazardous materials, product material inputs and post-consumer products and with respect to constructing, expanding and maintaining our facilities.', 'The costs of compliance, including remediations of any discovered issues and any changes to our operations mandated by new or amended laws, may be significant, and any failures to comply could result in significant expenses, delays or fines.', 'We are also subject to laws and regulations applicable to the supply, manufacture, import, sale and service of automobiles both domestically and abroad.', 'For example, in countries outside of the U.S., we are required to meet standards relating to vehicle safety, fuel economy and \\n\\n \\n\\nemissions that are often materially different from requirements in the U.S., thus resulting in additional investment into the vehicles and systems to ensure regulatory compliance in those countries.', 'This process may include official review and certification of our vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management systems requirements.', '\\n\\n', 'In particular, we offer in our vehicles Autopilot and FSD features that today assist drivers with certain tedious and potentially dangerous aspects of road travel, but which currently require drivers to remain fully engaged in the driving operation.', 'We are continuing to develop our FSD technology with the goal of achieving full self-driving capability in the future.', 'There are a variety of international, federal and state regulations that may apply to self-driving vehicles, which include many existing vehicle standards that were not originally intended to apply to vehicles that may not have a driver.', 'Such regulations continue to rapidly change, which increases the likelihood of a patchwork of complex or conflicting regulations, or may delay products or restrict self-driving features and availability, which could adversely affect our business.\\n\\n', 'Finally, as a manufacturer, installer and service provider with respect to solar generation and energy storage systems and a supplier of electricity generated and stored by the solar energy and energy storage systems we install for customers, we are impacted by federal, state and local regulations and policies concerning electricity pricing, the interconnection of electricity generation and storage equipment with the electric grid and the sale of electricity generated by third party-owned systems.'], ['If regulations and policies that adversely impact the interconnection or use of our solar and energy storage systems are introduced, they could deter potential customers from purchasing our solar and energy storage products, threaten the economics of our existing contracts and cause us to cease solar and energy storage system sales and operations in the relevant jurisdictions, which may harm our business, financial condition and operating results.\\n\\n', 'Any failure by us to comply with a variety of U.S. and international privacy and consumer protection laws may harm us. \\n\\n', 'Any failure by us or our vendor or other business partners to comply with our public privacy notice or with federal, state or international privacy, data protection or security laws or regulations relating to the processing, collection, use, retention, security and transfer of personally identifiable information could result in regulatory or litigation-related actions against us, legal liability, fines, damages, ongoing audit requirements and other significant costs.', 'Substantial expenses and operational changes may be required in connection with maintaining compliance with such laws, and in particular certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application.', 'For example, in May 2018, the General Data Protection Regulation began to fully apply to the processing of personal information collected from individuals located in the European Union, and has created new compliance obligations and significantly increased fines for noncompliance.', 'Similarly, as of January 2020, the California Consumer Privacy Act imposes certain legal obligations on our use and processing of personal information related to California residents.', 'Finally, new privacy and cybersecurity laws are coming into effect in China.', 'Notwithstanding our efforts to protect the security and integrity of our customers’ personal information, we may be required to expend significant resources to comply with data breach requirements if, for example, third parties improperly obtain and use the personal information of our customers or we otherwise experience a data loss with respect to customers’ personal information.', 'A major breach of our network security and systems may result in fines, penalties and damages and harm our brand, prospects and operating results.\\n\\n', 'We could be subject to liability, penalties and other restrictive sanctions and adverse consequences arising out of certain governmental investigations and proceedings.\\n\\n', 'We are cooperating with certain government investigations as discussed in Note 16, Commitments and Contingencies , to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K. To our knowledge, no government agency in any such ongoing investigation has concluded that any wrongdoing occurred.', 'However, we cannot predict the outcome or impact of any such ongoing matters, and there exists the possibility that we could be subject to liability, penalties and other restrictive sanctions and adverse consequences if the SEC, the U.S. Department of Justice or any other government agency were to pursue legal action in the future.', 'Moreover, we expect to incur costs in responding to related requests for information and subpoenas, and if instituted, in defending against any governmental proceedings.\\n\\n', 'For example, on October 16, 2018, the U.S. District Court for the Southern District of New York entered a final judgment approving the terms of a settlement filed with the Court on September 29, 2018, in connection with the actions taken by the SEC relating to Mr. Musk’s statement on August 7, 2018 that he was considering taking Tesla private.', 'Pursuant to the settlement, we, among other things, paid a civil penalty of $20 million, appointed an independent director as the chair of our board of directors, appointed two additional independent directors to our board of directors and made further enhancements to our disclosure controls and other corporate governance-related matters.', 'On April 26, 2019, this settlement was amended to clarify certain of the previously-agreed disclosure procedures, which was subsequently approved by the Court.', 'All other terms of the prior settlement were reaffirmed without modification.', 'Although we intend to continue to comply with the terms and requirements of the settlement, if there is a lack of compliance or an alleged lack of compliance, additional enforcement actions or other legal proceedings may be instituted against us.\\n\\n \\n\\nWe may face regulatory challenges to or limitations on our ability to sell vehicles directly.', '\\n\\n', 'While we intend to continue to leverage our most effective sales strategies, including sales through our website, we may not be able to sell our vehicles through our own stores in certain states in the U.S. with laws that may be interpreted to impose limitations on this direct-to-consumer sales model.', 'It has also been asserted that the laws in some states limit our ability to obtain dealer licenses from state motor vehicle regulators, and such assertions persist.', 'In certain locations, decisions by regulators permitting us to sell vehicles have been and may be challenged by dealer associations and others as to whether such decisions comply with applicable state motor vehicle industry laws.', 'We have prevailed in many of these lawsuits and such results have reinforced our continuing belief that state laws were not intended to apply to a manufacturer that does not have franchise dealers.', 'In some states, there have also been regulatory and legislative efforts by dealer associations to propose laws that, if enacted, would prevent us from obtaining dealer licenses in their states given our current sales model.', 'A few states have passed legislation that clarifies our ability to operate, but at the same time limits the number of dealer licenses we can obtain or stores that we can operate.', 'The application of state laws applicable to our operations continues to be difficult to predict.\\n\\n', 'Internationally, there may be laws in jurisdictions we have not yet entered or laws we are unaware of in jurisdictions we have entered that may restrict our sales or other business practices.', 'Even for those jurisdictions we have analyzed, the laws in this area can be complex, difficult to interpret and may change over time.', 'Continued regulatory limitations and other obstacles interfering with our ability to sell vehicles directly to consumers may harm our financial condition and operating results.\\n\\n', 'Risks Related to the Ownership of Our Common Stock\\n\\n', 'The trading price of our common stock is likely to continue to be volatile.\\n\\n', 'The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control.', 'Our common stock has experienced over the last 52 weeks an intra-day trading high of $900.40 per share and a low of $70.10 per share, as adjusted to give effect to the reflect the five-for-one stock split effected in the form of a stock dividend in August 2020 (the “Stock Split”) .', 'The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.', 'In particular, a large proportion of our common stock has been historically and may in the future be traded by short sellers which may put pressure on the supply and demand for our common stock, further influencing volatility in its market price.', 'Public perception and other factors outside of our control may additionally impact the stock price of companies like us that garner a disproportionate degree of public attention, regardless of actual operating performance.', 'In addition, in the past, following periods of volatility in the overall market or the market price of our shares, securities class action litigation has been filed against us.', 'While we defend such actions vigorously, any judgment against us or any future stockholder litigation could result in substantial costs and a diversion of our management’s attention and resources.\\n\\n', 'Our financial results may vary significantly from period to period due to fluctuations in our operating costs and other factors.\\n\\n', 'We expect our period-to-period financial results to vary based on our operating costs, which we anticipate will fluctuate as the pace at which we continue to design, develop and manufacture new products and increase production capacity by expanding our current manufacturing facilities and adding future facilities, may not be consistent or linear between periods.', 'Additionally, our revenues from period to period may fluctuate as we introduce existing products to new markets for the first time and as we develop and introduce new products.', 'As a result of these factors, we believe that quarter-to-quarter comparisons of our financial results, especially in the short term, are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.', 'Moreover, our financial results may not meet expectations of equity research analysts, ratings agencies or investors, who may be focused only on short-term quarterly financial results.', 'If any of this occurs, the trading price of our stock could fall substantially, either suddenly or over time.', '\\n\\n', 'We may fail to meet our publicly announced guidance or other expectations about our business, which could cause our stock price to decline.', '\\n\\n', 'We may provide from time to time guidance regarding our expected financial and business performance.', 'Correctly identifying key factors affecting business conditions and predicting future events is inherently an uncertain process, and our guidance may not ultimately be accurate and has in the past been inaccurate in certain respects, such as the timing of new product manufacturing ramps.', 'Our guidance is based on certain assumptions such as those relating to anticipated production and sales volumes (which generally are not linear throughout a given period), average sales prices, supplier and commodity costs and planned cost reductions.', 'If our guidance varies from actual results due to our assumptions not being met or the impact on our financial performance that could occur as a result of various risks and uncertainties, the market value of our common stock could decline significantly.\\n\\n \\n\\nTransactions relating to our convertible senior notes may dilute the ownership interest of existing stockholders, or may otherwise depress the price of our common stock.', '\\n\\n', 'The conversion of some or all of the convertible senior notes issued by us or our subsidiaries would dilute the ownership interests of existing stockholders to the extent we deliver shares upon conversion of any of such notes by their holders, and we may be required to deliver a significant number of shares.', 'Any sales in the public market of the common stock issuable upon such conversion could adversely affect their prevailing market prices.', 'In addition, the existence of the convertible senior notes may encourage short selling by market participants because the conversion of such notes could be used to satisfy short positions, or the anticipated conversion of such notes into shares of our common stock could depress the price of our common stock.\\n\\n', 'Moreover, in connection with certain of the convertible senior notes, we entered into convertible note hedge transactions, which are expected to reduce the potential dilution and/or offset potential cash payments we are required to make in excess of the principal amount upon conversion of the applicable notes.', 'We also entered into warrant transactions with the hedge counterparties, which could separately have a dilutive effect on our common stock to the extent that the market price per share of our common stock exceeds the applicable strike price of the warrants on the applicable expiration dates.', 'In addition, the hedge counterparties or their affiliates may enter into various transactions with respect to their hedge positions, which could also affect the market price of our common stock or the convertible senior notes.\\n\\n', 'If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline.\\n\\n', 'Certain banking institutions have made extensions of credit to Elon Musk, our Chief Executive Officer, a portion of which was used to purchase shares of common stock in certain of our public offerings and private placements at the same prices offered to third-party participants in such offerings and placements.', 'We are not a party to these loans, which are partially secured by pledges of a portion of the Tesla common stock currently owned by Mr. Musk.', 'If the price of our common stock were to decline substantially, Mr. Musk may be forced by one or more of the banking institutions to sell shares of Tesla common stock to satisfy his loan obligations if he could not do so through other means.', 'Any such sales could cause the price of our common stock to decline further.\\n\\n', 'Anti-takeover provisions contained in our governing documents, applicable laws and our convertible senior notes could impair a takeover attempt.\\n\\n', 'Our certificate of incorporation and bylaws afford certain rights and powers to our board of directors that may facilitate the delay or prevention of an acquisition that it deems undesirable.', 'We are also subject to Section 203 of the Delaware General Corporation Law and other provisions of Delaware law that limit the ability of stockholders in certain situations to effect certain business combinations.', 'In addition, the terms of our convertible senior notes may require us to repurchase such notes in the event of a fundamental change, including a takeover of our company.', 'Any of the foregoing provisions and terms that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.\\n\\n \\n\\n ']]\n" | |
| ] | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Next, we wrap the text summarization logic into a `summarize_text` function.\n", | |
| "\n" | |
| ], | |
| "metadata": { | |
| "id": "NYcGgKBI184o" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "def summarize_text(text):\n", | |
| " # prompt = f\"Summarize the following text so that your output can be read without having to read the entire text. Use the third person:\\n\\n{text}\"\n", | |
| " prompt = f\"Summarize the following text in five sentences:\\n\\n{text}\"\n", | |
| "\n", | |
| " response = openai.Completion.create(\n", | |
| " engine=\"text-davinci-003\", \n", | |
| " prompt=prompt,\n", | |
| " temperature=0.9, # 0.3\n", | |
| " max_tokens=250, # = 112 words\n", | |
| " top_p=1, \n", | |
| " frequency_penalty=0,\n", | |
| " presence_penalty=1\n", | |
| " )\n", | |
| "\n", | |
| " return response[\"choices\"][0][\"text\"]" | |
| ], | |
| "metadata": { | |
| "id": "E78G8yn21c39" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Next to the initial `.create()` parameters, we added some new options:\n", | |
| "\n", | |
| "- `temperature`: Higher values means the model will take more risks. Try 0.9 for more creative applications, and 0 for ones with a well-defined answer.\n", | |
| "- `max_tokens`: The maximum number of tokens to generate in the completion.\n", | |
| "- `top_p`: An alternative to sampling with temperature, where the model considers the results of the tokens with top_p probability mass. So 0.1 means only the tokens comprising the top 10% probability mass are considered.\n", | |
| "- `frequency_penalty`: Number between -2.0 and 2.0. Positive values penalize new tokens based on their existing frequency in the text so far, decreasing the model’s likelihood to repeat the same line verbatim.\n", | |
| "- `presence_penalty`: Number between -2.0 and 2.0. Positive values penalize new tokens based on whether they appear in the text so far, increasing the model’s likelihood to talk about new topics." | |
| ], | |
| "metadata": { | |
| "id": "fLvF-F0D2B0I" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "summary = summarize_text(\" \".join(chunks[0]))\n", | |
| "summary" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/", | |
| "height": 164 | |
| }, | |
| "id": "8z88vC1a38LV", | |
| "outputId": "504bd781-785b-4f75-ec07-94fa7e32c94a" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "execute_result", | |
| "data": { | |
| "text/plain": [ | |
| "\" We may not be successful in our efforts to do so or efficiently coordinate the global activities related to these new factories and products, which could harm our business, prospects, operating results and financial condition. \\n\\nThe risks associated with being able to grow Tesla's business include macroeconomic conditions resulting from the global COVID-19 pandemic, delays in launching and ramping production of products and features, difficulties accurately forecasting demand, competition, volatility in oil and gasoline prices, government regulations and economic incentives, and perceptions about electric vehicle features. The ability to increase production, make vehicles affordable globally and streamline delivery logistics is dependent on the construction and ramp of specialized factories. Any delays, complications or inaccuracies in managing these operations can have significant impacts on their brand, business, prospects, financial condition and operating results.\"" | |
| ], | |
| "application/vnd.google.colaboratory.intrinsic+json": { | |
| "type": "string" | |
| } | |
| }, | |
| "metadata": {}, | |
| "execution_count": 87 | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "Our final piece of code looks like this:" | |
| ], | |
| "metadata": { | |
| "id": "AwU-r4R92Q2X" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "chunk_summaries = []\n", | |
| "\n", | |
| "for chunk in chunks:\n", | |
| " chunk_summary = summarize_text(\" \".join(chunk))\n", | |
| " chunk_summaries.append(chunk_summary)" | |
| ], | |
| "metadata": { | |
| "id": "EFPlGMca4S5h" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "section_summary = \" \".join(chunk_summaries)" | |
| ], | |
| "metadata": { | |
| "id": "eboP43ae5m0i" | |
| }, | |
| "execution_count": null, | |
| "outputs": [] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "The example of a complete `section_summary` text looks already very promising:" | |
| ], | |
| "metadata": { | |
| "id": "EfCCb6R32TnW" | |
| } | |
| }, | |
| { | |
| "cell_type": "code", | |
| "source": [ | |
| "section_summary" | |
| ], | |
| "metadata": { | |
| "colab": { | |
| "base_uri": "https://localhost:8080/", | |
| "height": 605 | |
| }, | |
| "id": "j048atJnBsnI", | |
| "outputId": "65833593-df14-48cc-d81a-97a82f25a25c" | |
| }, | |
| "execution_count": null, | |
| "outputs": [ | |
| { | |
| "output_type": "execute_result", | |
| "data": { | |
| "text/plain": [ | |
| "\" If we are unable to do so, or if we experience delays in the construction of or ramp at our new factories, or if we are unable to generate and sustain demand for vehicles manufactured there, our business, prospects, financial condition and operating results may be harmed. \\n\\nRisk factors related to the global COVID-19 pandemic, such as macroeconomic conditions, government regulations, shifting social behaviors, supplier suspensions, employee furloughs, and increased demand for personal electronics, could have a negative impact on Tesla's business, financial condition and future results. Additionally, delays in launching and ramping the production of their products, managing growth, increasing sales capabilities, delivering vehicles, and servicing and charging networks could also harm their brand, We have certain obligations under these agreements, including to make payments for rent and research and development activities. If we fail to comply with our obligations under the agreements or if the SUNY Foundation exercises its rights under the agreements, our business, prospects, operating results and financial condition may be harmed.\\n\\nRisk factors related to our operations include issues with lithium-ion cells or other components manufactured at Gigafactory Nevada, maintaining and expanding international operations, product defects, product liability claims, maintaining public credibility and confidence, managing financing programs, and managing obligations under our agreement with the Research Foundation for the State University of New York. We need to maintain and significantly grow our access to battery cells, including through the development and manufacture of our own cells, and \\n\\nRisk factors associated with Tesla include the need to meet employment targets and spending obligations in New York, dependence on key employees, competition for qualified personnel, potential product recalls, inadequate warranty reserves, insufficient insurance coverage, and substantial indebtedness. Elon Musk's role as CEO and largest stockholder is essential to the company's success, and any failure to meet obligations under the agreement with the SUNY Foundation could result in penalties or adjustments to operations. The risk of union activity and potential disruption of operations is also present, as is the risk of unauthorized access to products and systems, which could damage the company's reputation. Finally, Tesla may not have sufficient cash flow from operations to pay its debt obligations or refinance existing debt. For example, the FERC has issued orders that have impacted the ability of third party-owned systems to sell electricity generated by such systems into wholesale markets. In addition, certain state and local regulations may limit or prohibit customers from selling electricity generated by their solar energy systems into the grid. Any changes to these regulations or policies could adversely affect our business.\\n\\nRisk factors related to our business include our ability to make payments being limited by law or agreements, covenant restrictions in our debt agreements limiting our ability to operate our business, difficulty in obtaining additional funds when needed, early obsolescence of manufacturing equipment, volatility of digital assets, fluctuations in currency exchange rates, defending against intellectual property infringement claims, events outside of our control, government and economic incentives \\nRisk factors related to the sale and use of our solar and energy storage systems, failure to comply with privacy and consumer protection laws, regulatory challenges to or limitations on our ability to sell vehicles directly, volatility of stock price, failure to meet publicly announced guidance, dilution of ownership interest, sales of Elon Musk's pledged shares, and anti-takeover provisions could all adversely affect our business, financial condition, and operating results. These risks may result in fines, penalties, damages, legal liability, audit requirements, costs, and other restrictive sanctions. The trading price of our common stock has been highly volatile and could continue to be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our financial results may vary\"" | |
| ], | |
| "application/vnd.google.colaboratory.intrinsic+json": { | |
| "type": "string" | |
| } | |
| }, | |
| "metadata": {}, | |
| "execution_count": 65 | |
| } | |
| ] | |
| }, | |
| { | |
| "cell_type": "markdown", | |
| "source": [ | |
| "As we can see, there is still room for improvement. For example, GPT switches between first and third person narration (“we” vs “Tesla”) and sometimes relationships between entities are not clear (“under the agreement” — what agreement?). Keep in mind, we can significantly improve GPT’s output by improving our prompt, i.e. task definition.\n", | |
| "\n", | |
| "For example, we can explicitly tell GPT to use third person narration. Also, specifying the exact number of sentences to be generated for a summary of a section chunk is not the best way to achieve a reliable output as some sections might contain more relevant facts than others. Keep in mind, the `text_to_chunks` function doesn’t consider context while splitting sentences. In other words, the first sentence of a chunk might contextually refer to the content of the previous chunk, but the way we implemented the summarizer, GPT ends up ignoring the contextual reference.\n", | |
| "\n", | |
| "Other options for the `prompt` are:\n", | |
| "\n", | |
| "- List and summarize all risk factors described in the following text.\n", | |
| "- Summarize the following text so that your output can be read without having to read the entire text. Use third person narration.\n", | |
| "- Create a list of all risk factors described in the following text. Mention each risk factor in a new line." | |
| ], | |
| "metadata": { | |
| "id": "4lGy1tsE2SdW" | |
| } | |
| } | |
| ] | |
| } |
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