Letter to

Shareholders

Dear Fellow Shareholders,

Given your overwhelming support at last year’s shareholder

meeting, we have now aligned our corporate home with our

operational home in the State of Texas. It is clear to us that moving

to Texas was the right choice for Tesla and for all of you. Here,

we benefit from a corporate governance framework that enables

boards to listen to, and act in accordance with, the will of

shareholders, keeps them accountable to shareholders, and

facilitates the bold decision-making necessary to drive

extraordinary innovation. We have a platform for our big ideas

and even bigger ambitions to grow and evolve, culminating in a

revolutionary vision for humanity’s future and Tesla’s role in bringing

that future to life.

In our first year as a Texas corporation, Tesla delivered in a wide

range of areas. To name just a few: we delivered our 8 millionth

vehicle, deployed more than 37 GWh of energy storage from Q3

2024 through the end of Q2 2025 and launched our new Model Y

in four factories across three continents. At the same time, in June

of this year, we launched our first Robotaxis in the streets of

Austin, Texas, and, in July of this year, signed a landmark deal

with Samsung to facilitate future chip production nearby. In

addition, the Board has taken meaningful steps toward delivering

on our past compensation deal with Elon, which you, our

shareholders, have previously—and overwhelmingly—approved

twice, by granting him the 2025 CEO Interim Award. Now, we are

laying the foundation for our next decade of growth by rolling out

our ambitious vision and securing our leadership to deliver

against that vision.

Sustainable Abundance: A Singular Vision for Our Collective

Future

A few days ago, Elon unveiled an inspiring next chapter for Tesla

with Master Plan, Part IV, which is focused on creating a Sustainable

Abundance for all. While these ambitions are tailored for a new

age of transformational real-world technologies powered by AI, the

foundational ideals upon which they are built are the same ones

that gave rise to the first Master Plan that Elon unveiled almost

20 years ago. We are, and have always been, a company that thinks

bolder, acts faster and strives for a better future. Master Plan,

Part IV builds on that, by reimagining labor, mobility and energy

and bringing AI into the physical world through products and

services like FSD, Optimus and Robotaxi.

Growth that may seem impossible today can be unlocked with

new ideas, better technology and greater innovation. By

introducing innovative and affordable technologies at scale, Tesla

can help bring about a society that democratizes autonomous

goods and services. As a result, Sustainable Abundance represents

a long-term vision, putting us at a critical inflection point not just

as a company, but as a society.

We believe that Elon’s singular vision is vital to navigating this

critical inflection point. We also recognize the formidable nature

of this undertaking and as a result, the importance of having a

leader who is not only willing and capable but eager to meet

this challenge.

Simply put, retaining and incentivizing Elon is fundamental to

Tesla achieving these goals and becoming the most valuable

company in history. So, the Board appointed us to establish a

special committee of the Board, and thereafter we began a

rigorous, seven-month process that involved evaluating numerous

novel compensation structures designed to align extraordinary

long-term shareholder value with incentives that will drive peak

performance from our visionary leader. Now, we are building upon

the chassis of the wildly successful performance and shareholder

value Elon delivered under the innovative 2018 CEO Performance

Award program and have customized it for today’s Tesla to

create a better world for everyone, including you, our shareholders.

A Super Ambitious Incentive Package for a Pioneering,

Ambitious and Unique CEO

Last month, when we delivered the news about the Interim

Award, we told you that our work was ongoing. We have since

concluded a robust process and are ready to unveil a longer-term

CEO compensation strategy. Based on our recommendations as

the special committee, the Board, with Elon and Kimbal recusing

themselves, have unanimously recommended that you as

shareholders:

1.

Approve an amendment and restatement of Tesla’s 2019

Equity Incentive Plan that would:

a.

provide a special share pool to empower the Board

to fulfill our promises to Elon for what he is still owed

under the 2018 CEO Performance Award; and

b.

replenish the employee incentive pool by 60,000,000

shares, so that Tesla may continue to attract and retain

our amazing employees in this unprecedented time

of talent competition.

2.

Approve a new 2025 CEO Performance Award that

uniquely challenges Elon to guide Tesla through a new

phase of unprecedented growth by rewarding him—only

if he delivers (once again) extraordinary financial returns

for you, the shareholders, and remains at Tesla in a

leadership role for many years to come.

The 2025 CEO Performance Award: Learning from Our Past,

Building Towards a More Profitable Future for Tesla and a Better

Future for Us All

Tesla does not currently have a long-term CEO performance

award in place to retain and incentivize Elon to focus his energies

on Tesla and lead us through this pivotal moment in our history.

It’s time to change that.

We’re asking you to approve the 2025 CEO Performance Award.

In designing the new performance award, we explored numerous

alternatives. Ultimately, the new award aims to build upon the

success of the 2018 CEO Performance Award framework, which

ensured that Elon was only paid for performance delivered and

incentivized to guide Tesla through a period of meteoric growth.

The 2025 CEO Performance Award similarly challenges Elon to

again meet a series of even more aspirational goals, including

operational milestones focused on reaching Adjusted EBITDA

targets (thresholds that are up to 28 times higher than the 2018

CEO Performance Award’s top Adjusted EBITDA milestone) and

rolling out new or expanded product offerings (including 1 million

Robotaxis in commercial operation and delivery of 1 million AI

Bots), all while growing the company’s market capitalization by

trillions of dollars.

Yes, you read that correctly: in 2018, Elon had to grow Tesla by

billions; in 2025, he has to grow Tesla by trillions—to be exact, he

must create nearly $7.5 trillion in value for shareholders for him

to receive the full award.

In addition to these unprecedented performance milestones, the

2025 CEO Performance Award also includes innovative structural

features, born out of the special committee’s considered analysis,

and extensive shareholder feedback. These features include

supercharged retention (at least seven and a half years and up to

10 years to vest in the full award), structural protections to

minimize stock price volatility due to administration of this award

and, thereafter, incentives for Elon to participate in the Board’s

continued development of a framework for long-term CEO

succession. If Elon achieves all the performance milestones under

this principle-based 2025 CEO Performance Award, his leadership

will propel Tesla to become the most valuable company in history.

Vote for the Board of Directors Team and Governance Framework

Designed for Success and Protective of Shareholder Rights

This year has also seen Tesla achieve meaningful corporate

governance milestones, including the addition of a new

independent director and Audit Committee member, Jack

Hartung, whose wealth of complex public company expertise

strengthens and complements a Board positioned to handle the

challenges facing Tesla. Meanwhile, as we always have, we are

listening and responding to our shareholders and this year’s proxy

includes a host of governance updates, numerous shareholder

proposals as well as a management proposal to eliminate

supermajority voting requirements.

While we believe Elon is the only person capable of leading Tesla

at this critical inflection point, changing the world is neither an

overnight process nor the work of a single person. So, we also

want your help in securing the team and strategy needed to

achieve goals that others will perceive as impossible but that we

know are possible for Tesla. Accordingly, we have put forward a

slate of proposals intended to create the conditions Tesla needs

for its next phase of transformative growth, from director

reelections to proposals from our shareholders.

The directors up for reelection this year include three extremely

talented and experienced members of our Board: Ira Ehrenpreis,

Joe Gebbia and Kathleen Wilson-Thompson. These extraordinary

directors bring a wealth of experience, insights and visions to

the team.

• Ira has tirelessly served as a fortifying leader and mentor,

helping steer Tesla through previous phases of exceptional

growth and challenge while leading Tesla’s implementation

of a governance framework designed for success—

something we know he is best positioned to do in this next

phase of growth.

• Joe is a visionary tech founder himself, leading Airbnb—one

of the most successful tech companies—from startup to

public company, making it a household name with worldwide

operations.

• Kathleen has brought her decades of world-class public-

company executive experience, including as an HR

professional, to the forefront of our most challenging

governance matters over the past two years, serving on

both this year’s special committee and last year’s special

committee, making her a vital voice as we navigate new

challenges and opportunities.

This mix of skills is what makes our Board so adept at navigating

uncharted territory, and what we believe will be crucial to

overcoming these exciting but challenging opportunities.

But the real reason Tesla has been so successful is the fact that

our best team members are all of you. Tesla has the most engaged

shareholders of any public company. We are in Texas because it

provides a more predictable corporate governance framework that

allows us to hear from you as the people who know Tesla

best—those who have actual stakes in the future of Tesla.

On this basis, our proxy statement contains a number of

shareholder proposals. Our Board has included its views, and we

look forward to discussing them with you.

As the Special Committee of the Board, we appreciate your time

and scrutiny and understand that your decisions at this year’s

meeting are among the most important choices that we have ever

asked of you, our shareholders:

• Will you choose, again, to retain and incentivize Elon to

lead Tesla through our next chapter?

• Will you provide Elon with the right Tesla board members

to work alongside him, pursuing the worthy and world-

reshaping ambitions of Master Plan, Part IV?

• Will you support Tesla on a pathway to becoming the most

valuable company in history?

While these questions are simple, your answers will have a

profound impact on the future of Tesla and the world we live in.

Thank you for your continued support of Tesla.

Very truly yours,

Robyn Denholm & Kathleen Wilson-Thompson

Members of the Special Committee of the Board of Directors