The following is a letter that was sent to Tesla Roadster customers today to review key developments in the Roadster program.

Since we last provided a program update we have achieved an extraordinary milestone - on March 17th, the Tesla Roadster entered regular production. In this program update we will focus on a wide variety of topics that relate to the program now that we are in this new phase, including:

1. Production Schedule
2. “Powertrain 1.5”
3. Warranty
4. New “Out of Service Area” Policy
5. Store and Service Center locations and timing
6. Additional News

Production Schedule

Now that production has started, we would like to provide you with an update on the plan and status of production. Although everyone is eager to receive their cars as soon as possible, it is important in this program, and any automobile program, to start the production line slowly and to increase the rate at which cars are manufactured at a very deliberate pace. This “slow ramp” ensures a high level of quality even with the first cars off the line. Inevitably, there are process and quality issues that come up as one increases the rate of production and a slow ramp rate enables us to address a myriad of issues in a controlled manner – remember that the Roadster is not just a new car it is a new automotive paradigm.

After an initial period of slow production rates, the pace of production starts to pick up until we are producing in excess of 100 cars per month by November. For this reason, the delivery of the approximately 600 2008 Model Year cars is weighted toward the end of this year and beginning of next year.

The data below is intended to provide a guideline as to when we plan to achieve specific milestones in vehicle production. While this data will give you a sense of when your car will be produced, the actual delivery time will lag by about 8 weeks to allow for shipping and finishing. You will be contacted by Member Services 3 months prior to your expected production date to confirm details.

In the past 2 months, we have moved more slowly than our planned pace of 1 car per week. At the time of this writing, we are preparing to put cars number 6 and 7 on the line. This is by our own doing, as we have identified and addressed some minor supplier issues and teething pains. We expect to get back on pace so have not changed the overall schedule.

This is exactly the kind of situation we anticipated and is the reason for the slow initial ramp. In the early going, it is easier to address issues that inevitably crop up and then get back on track without major impact to the overall schedule. One thing is for certain: we will not sacrifice quality or customer satisfaction to force the schedule.

As we have mentioned before, the plan is to stick to a relatively slow pace of production until “Powertrain 1.5” is ready for insertion into the production process. At this time, we can then start to accelerate the production pace.

“Powertrain 1.5”

The development of “Powertrain 1.5” is progressing very well. We have the newly designed PEM (Power Electronics Module) running at the higher 850 amp level in a prototype car being used for durability and other testing. The higher current levels are generating the expected higher levels of torque (~280 lb. ft) that will enable the same 3.9 second 0-60 acceleration with the new single speed gearbox under development. This new powertrain configuration is planned to be inserted into the production schedule in September, at about the 40th car. All cars produced prior to this switchover will be upgraded free of charge as previously discussed.

Warranty

Tesla has established a comprehensive warranty for the Roadster. The 3 year/36,000 mile base warranty covers all aspects of the car for defects in materials and workmanship. The battery pack is part of this comprehensive warranty. Details about the warranty will be covered in your owner’s documentation.

Tesla will offer an extended warranty option at no cost to 2008 Roadster Club members, extending the coverage to 4 years/50,000 miles. Purchasers of later model year Roadsters will be offered the extended warranty at additional cost.

The battery pack is expected to last longer than the warranty period, although repairs beyond the warranty period will be charged at regular part and labor rates.

All high-energy lithium ion cells experience a gradual loss in maximum capacity based on usage levels, time, and other factors. Your owner’s documentation will include information on expected behavior of the battery over time and the factors that affect the rate of wear.

Out of Service Area Service Policy

Based on customer feedback and other practical considerations, the “Out of Service Area” policy has been changed. The original policy required a fee of $8,000 to be paid on delivery of the car to cover additional transport costs over the life of the warranty for customers who are located further than 100 miles from a Tesla Service Center.

This policy has been replaced with a simpler approach. Instead of paying an up-front fee, customers who are located outside a Tesla service area are responsible for the costs associated with transport to and from Tesla Service Centers. Tesla Customer Service will coordinate long distance transport on behalf of the customer if desired.

Store and Service Center Locations

Tesla’s flagship Los Angeles Store is now open to the public. The Menlo Park Store will open this summer, although it will be operational and servicing cars sooner than that.

Over time Tesla Motors will build additional Stores containing both sales/service facilities across the country. For now, the priority is to establish purpose-built service facilities to service cars that are planned for delivery over the next 12 months. Based on the number of cars due to be delivered in various markets, we anticipate opening additional service facilities in the following order:

1. Los Angeles – Open
2. Menlo Park – Summer 2008
3. New York – Q4 2008
4. Chicago – Q1 2009
5. Miami – Q1 2009
6. Seattle – Q1 2009

Specific locations and dates are yet to be established. Additional locations will be announced in the future. We expect to establish service offerings in all major US cities by 2010.

Additional News

Tesla Motors recently announced that the Tesla Roadster would be available for delivery in Europe beginning April, 2009. For the first year, a special “Signature Edition” of 250 cars will be offered for all of Europe. This special edition car, fully loaded and highly customized, sells for 99,000 Euro (excl. VAT). We plan to establish service facilities in key European cities, starting with London, Paris, Munich, Northern Germany, Milan, Oslo, Copenhagen (this list is being finalized). Many of you have enquired about European delivery for yourself or on behalf of a friend or colleague, so we wanted to let you know about this special offer. If you are interested in learning more or want to help us with our European launch, just let us know or email eurosales@teslamotors.com .

We recently announced pricing on the 2009 Tesla Roadster in the U.S. The base price is expected to be $109,000. With all factory options, the Roadster will cost about $120,200. This price increase does not affect any member who has already reserved a 2008 Roadster.

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