Exhibit 1.01

Tesla Conflict Minerals Report

(This report has been filed with the U.S. Securities and Exchange Commission to comply with the reporting period for the calendar year ended December 31, 2019.)

Tesla’s Mission

The goal of Tesla is to accelerate the world’s transition to sustainable energy.

 

Overview of Tesla

We design, develop, manufacture, sell, and lease high-performance fully electric vehicles and sustainable energy generation and storage systems, and offer services related to our products.

Introduction

Tesla is committed to sourcing only responsibly produced materials. This means having safe and humane working conditions in our supply chain and ensuring that workers are treated with respect and dignity. In addition to the Tesla Supplier Code of Conduct (“Code”), we also have a Human Rights and Conflict Minerals Policy (“Policy”) that outlines our expectations to all suppliers and partners that work with us, as well as our commitment to conflict-free sourcing. We strictly follow all U.S. and foreign legal requirements and require companies in our supply chain to do the same. Our contracts with suppliers also require them to adhere to Tesla’s policies, including our Code, Policy, and environmental and safety requirements. Tesla also requires our suppliers to provide evidence to us of their operations that address these social, environmental, and sustainability issues as well as their sourcing in a responsible manner.

Tesla’s supply chain has a unique hybrid of traditional automotive and high-tech industry suppliers from around the world. Many of our Tier 1 suppliers (i.e., direct suppliers) do not purchase all of their raw materials directly from mining/refining parties and instead obtain them from their upstream suppliers and sub-suppliers. Therefore, reliably determining the origin of all of our suppliers’ products is a difficult task, but the due diligence practices outlined below provide additional information and transparency that help us and our suppliers adhere to the responsible sourcing principles of our Code and Policy.

Our Tier 1 automobile parts suppliers are required to register and complete the domestic and international material compliance requirements in the automotive industry standard International Material Data System (“IMDS”) in order to meet European Union and other international materials and environmental related regulations. This requirement is also mandated for all suppliers who supply their products or raw materials to us as part of our production-parts approval process.

 

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Tesla’s Responsible Supply Chain

All of Tesla’s supply chain partners are subject to our Supplier Code of Conduct (“Code"). This Code is the foundation for ensuring social and environmental responsibility and ethical conduct throughout our supply chain, no matter the industry, region, or materials. Tesla continues to identify and do business with organizations that conduct their business with principles that are consistent with our Code.

Tesla, along with our partners and independent third parties, conduct audits to observe these principles in action. If there is a reasonable basis to believe a supplier partner is in violation of our Code, Tesla will transition away from that relationship unless the violation is cured in a satisfactory manner.

In addition, all our suppliers are subject to Tesla’s Human Rights and Conflict Minerals Policy (“Policy"), which is also publicly available on Tesla’s legal page (www.tesla.com/about/legal).

Conflict Minerals Policy

Tesla is committed to sourcing responsibly and considers mining activities that fuel conflict as unacceptable. Pursuant to Tesla’s Policy, our suppliers are expected to use reasonable efforts to ensure that parts and products supplied to Tesla are “DRC conflict free,” meaning that such conflict minerals do not benefit armed groups in the Democratic Republic of the Congo (“DRC”) or any adjoining country. “Conflict minerals” are defined as:

(i) columbite-tantalite (tantalum);

(ii) cassiterite (tin);

(iii) gold;

(iv) wolframite (tungsten); and

(v) any derivatives of the above.

 

These materials are considered “conflict free” if they are found not to be providing any benefit to armed groups within the DRC or its adjoining countries. Tesla requires our suppliers to establish policies, due diligence frameworks, and management systems consistent with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (“OECD Guidance”). Tesla expects its suppliers to stay up to date with and to use validated conflict-free smelters and refiners assessed by the Responsible Mineral Initiative (“RMI”) and similar organizations.

Tesla recognizes the importance of mining responsibly and in a way that contributes to economic and social opportunity and development in the DRC region. Suppliers are allowed to source from the DRC or its adjoining countries, so long as it is from validated conflict-free sources such as smelters recognized as conformant under the RMI’s Responsible Minerals Assurance Program (“RMAP”).

 

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Tesla’s Policy also includes a grievance mechanism where concerned parties may contact Tesla’s Board of Directors and provide comments about conflict minerals and other sourcing matters.

Human Rights Policy

Human trafficking, child labor, and slavery are crimes under state, federal, and international law. Unfortunately, these crimes continue to exist in regions throughout the world. Tesla is committed to ensuring that slave or child labor or human trafficking is not occurring within our supply chain. Tesla does not, and will not, tolerate the use of slave or child labor in the manufacturing of its products and does not, and will not, accept products or services from suppliers that engage in human trafficking in any form.

Supplier Compliance

In order to further ensure suppliers are in compliance with our expectations, our Code and Policy, as well as applicable legal requirements, Tesla is committed to:

In-Scope Products

As a company at the intersection of technology, transportation (electric vehicles), and energy (solar and storage), products manufactured by Tesla may contain some portion of Gold, Tantalum, Tin, or Tungsten (commonly referred to as “3TG”) or a combination of these.¹

 

 

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Automotive Suppliers

We use the IMDS to help determine which automotive suppliers to include in our conflict minerals due diligence inquiries. Utilizing the IMDS database, we review our entire Tier 1 supplier base to determine which suppliers are likely to supply products with 3TG. To best address the use of conflict minerals within our supply chain, we engage with suppliers who have a likelihood of using the covered materials in the products supplied to us in our Reasonable Country of Origin Inquiry (“RCOI"). For any automotive suppliers that provided a response in contradiction to their IMDS submission, Tesla requested that the supplier provide an update either to the IMDS or Conflict Minerals Reporting Template (“CMRT”).

Non-Automotive Suppliers

In an effort to include all possible sources of 3TG in our supply chains, Tesla also requested Tier 1 suppliers in our solar and energy supply chains to complete CMRTs and included them in the RCOI with our automotive suppliers.

Reasonable Country of Origin Inquiry

Due to Tesla’s downstream position in our supply chain, any efforts to understand the origin of raw materials rely on the cooperation of our Tier 1 and other upstream suppliers. In total, more than 450 Tier 1 suppliers took part in our RCOI process, including automotive, solar, and energy suppliers. Our goal continues to be achieving a 100% response rate, and we reach out by e-mail and phone to our Tier 1 suppliers multiple times throughout the year. In total, we received responses from over 380 of these suppliers, for a response rate over 80%, which is in line with our participation rate in the previous reporting year. Over the past year, Tesla has added new products and contracted with new suppliers as the company continues to grow, offered new products, and expanded to new regions around the world. Our collection efforts captured all business-significant suppliers and included information from more than 75% of our covered parts spend in 2019.

For the 2019 reporting year, we utilized the RMI’s CMRT to gather information from our Tier 1 suppliers. In order to gain greater transparency into all potential smelter and conflict minerals risks, we request suppliers to provide responses based on all of their operations at the company level rather than just providing information about their supply chain specifically related to the product(s) that Tesla purchases.

In addition, Tesla engaged a reputable third-party service provider with experience in conflict minerals data collection to assist with the engagement and training of suppliers, collection of CMRTs, validation of responses, smelter identification, initial risk assessment, and conflict minerals report review.

 

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Industry Collaboration

We recognize the importance of working with industry peers and organizations and believe that a consolidated effort is the most efficient method to determine the reasonable country of origin. Through our continued involvement in the RMI, we contribute information to help identify the current status of many of the smelters in our supply chain. To help determine the reasonable country of origin for the 3TG in our supply chain, we continue to monitor and rely upon the RMI’s progress in identifying and validating smelters and refiners.

The information in Annex I is based on RMI’s RCOI data as of April 1, 2020 and Tesla’s 2019 supplier CMRT responses received. Based on this information, the countries of origin of the 3TG contained in our products may include the countries listed below in Annex I. For example, this information may be underinclusive to the extent any of our suppliers have not provided complete information regarding the countries of origin in their or their sub-suppliers' supply chains. At the same time, this list may be overinclusive due to the RMI’s database including countries from the supply chains of all of its participants and not just Tesla, and we have noted where there has been no evidence from the CMRTs collected that a country on the list is part of our supply chain. Annex II lists the conformant smelters and refiners that may be in Tesla’s or our suppliers’ supply chains with respect to 3TG contained in our products, and this information is based on the 2019 supplier CMRT responses received and data from the RMI regarding conformant smelters.

Description of Due Diligence

Our conflict minerals process and policies are designed to conform in all material respects with the OECD Guidance.

Step 1: Establish Strong Company Management Systems

As noted above, Tesla has adopted a Human Rights and Conflict Minerals Policy, as well as published the Tesla Supplier Code of Conduct. These policies are publicly available through our website (www.tesla.com/about/legal). Our supplier manuals also address our policies on conflict minerals and state our expectation that all Tesla suppliers are accountable for performing due diligence on their mineral supply chains in accordance with the OECD Guidance. Our contractual terms with suppliers (i.e., General Terms and Conditions) also include our expectation that all Tesla suppliers are accountable for performing conflict minerals due diligence aligned with the OECD Guidance as required by Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Tesla maintains a specialized team within the company’s supply chain organization to lead these due diligence efforts, including implementing the additional use of the CMRT to further query at-risk Tier 1 suppliers. In addition, an internal cross-functional Tesla Conflict Minerals Steering Committee (the “Steering Committee”) composed of Tesla management from Supply Chain, Internal Audit, Environmental, Health and Safety, and Legal oversees these due diligence efforts and potential risks and issues within our supply base. Our efforts have been approved, and the letter of authorization sent to suppliers signed, by Tesla’s President of Automotive.

 

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Step 2: Identify and Assess Risk in the Supply Chain

Tesla’s risk identification and assessment process begins with the RCOI process detailed above and by leveraging the CMRT. In-scope Tier 1 suppliers are engaged multiple times during this process, and internal stakeholders, such as global supply managers, are also engaged to emphasize to our suppliers the importance of their participation. Supplier data is collected over a ten-week period in order to allow for follow-up and further validation.

Supplier responses are continually reviewed throughout the process to ensure consistency with expected responses, and suppliers are asked to provide evidence of their own due diligence processes. Utilizing a reputable third party, we also assess each CMRT received and follow up with suppliers who provided incomplete or invalid responses.

Smelter information is assessed against information provided by the RMI for validity as a smelter. Valid smelters are then reviewed for their status as “conformant to” or “active in” a conflict-free audit program. Tesla also leverages the RMI’s Risk Readiness Assessment tool to better understand where smelter risk may emerge in our supply chain.

Tesla carefully monitors responses from suppliers on their own internal policies and processes regarding conflict minerals. If a supplier’s policy does not meet our expectations, we not only emphasize the importance of these practices, but also work with that supplier to ensure that its policies are updated to properly address the appropriate process within their supply chain.

Step 3: Design and Implement a Strategy to Respond to Identified Risks

We also monitor smelter validation progress by the RMI or other cross-recognized smelter audit programs. Any concerns with supplier responses throughout the data collection process are brought to the attention of the Steering Committee for further review and action. Suppliers who do not respond are also brought to the attention of a Steering Committee member for escalation.

In alignment with the OECD Guidance, Tesla shares the names of smelters provided to us that have not been validated to the RMI for validation and audit.

With recognition of the importance of cross-industry collaboration, Tesla continues to participate in the RMI and the Silicon Valley Conflict Minerals and Human Rights Forum.

Step 4: Perform Independent Third-Party Audit of Supply Chain Due Diligence

As outlined in the OECD Guidance, we support the RMI, an industry initiative which audits due diligence activities of smelters and refiners. We support the RMI’s outreach efforts and RMAP smelter audits through our membership in these programs. We reserve the right to ask any high-risk Tier 1 supplier to audit their supply chain conflict minerals due diligence program using a third-party independent auditor.

The data on which we rely for certain statements in this declaration are obtained through our membership in the RMI using the RCOI report for member TSLA.

 

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Step 5: Report on Supply Chain Due Diligence

We report on our due diligence efforts as required by law and to comply with Rule 13p-1 under the Securities Exchange Act of 1934, as amended. This report is also available on Tesla’s publicly available Legal page (www.tesla.com/about/legal), and additional information on Tesla’s supply chain due diligence efforts, including our work to reduce risks and source ethically in our cobalt supply chain, can be found in our Impact Report, published annually since 2019.

Continuous Improvement

Tesla is always working to continually improve and our goal remains to source all of our 3TG through conflict-free and conformant smelters and refiners. In an effort to further strengthen our efforts, we also:

 

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Results of Reasonable Country of Origin Inquiry & Due Diligence

Annex I

Due to Tesla’s downstream position in our supply chain, any efforts to understand the origin of raw materials rely heavily on the cooperation of our Tier 1 and upstream suppliers. We have uncovered no evidence to date that our suppliers’ sourcing of 3TG materials has contributed to conflict or human rights violations. Based on our due diligence efforts to date, we believe that the following list of Countries of Origin reflects countries from which our suppliers may have sourced from conformant smelters and refiners. This information may be underinclusive to the extent any of our suppliers have not provided complete information regarding the countries of origin in their or their sub-suppliers' supply chains. At the same time, this list may be overinclusive due to the RMI’s database including countries from the supply chains of all of its participants and not just Tesla, and we have noted where there has been no evidence from the CMRTs collected that a country on the list is part of our supply chain. Tesla will continue to work with our suppliers to source only from such compliant smelters and refiners, including by encouraging suppliers to have their non-participating smelters successfully complete an audit program.

Through its membership and participation in the RMI, Tesla is provided information on the country of origin of conformant smelters within our supply chain. All materials sourced through conformant smelters and refiners are considered “Conflict Free”. In 2019, the information provided by the RMI on countries of origin expanded greatly beyond the previously provided data on Level 1, 2, and 3 sourcing to now include aggregated sourcing data from all of its contributors through cross-recognized conflict-free protocols. The RMI’s RCOI data does not specify the countries of origin of the conflict minerals processed by the compliant smelters and refineries listed below in Annex II. In addition, it is not always possible to know the countries of origin of the 3TG contained in scrap and recycled sources. Tesla continues to work to gain further insight and transparency into our and our suppliers’ supply chain for 3TG, including fully identifying countries of origin of 3TG and the smelters and refiners used to process the necessary conflict minerals in Tesla’s products.

Tesla has chosen to disclose all countries provided in the RMI’s newly expanded database, which includes information from all of its participants’ supply chains and not just Tesla. In addition, the majority of our suppliers provided information on the smelters used in their entire operations at the company level, and not just for their products specifically purchased by Tesla. It is important to note that we do not have direct relationships with suppliers or sub-suppliers in many of these countries and have no direct influence on the supply chain when it is so many tiers removed. Therefore, although a country may be listed in the tables below, it does not necessarily indicate that Tesla or one of our suppliers is sourcing from that country. In addition to the expanded RMI database findings described above, Tesla greatly increased the number of suppliers in our supply chain due to our higher manufacturing volumes with the introduction of new vehicles to our product lineup. As our processes continue to improve and the specificity of the information provided by the RMI database increases, this list may fluctuate year over year.

 

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Countries listed in bold are considered “covered countries” (i.e., the DRC and its adjoining countries) under U.S. conflict minerals disclosure rules.

** Tesla does not directly source from these countries and has no relationship with any companies or individuals located within their national boundaries. Tesla continues to utilize the list of potential countries of origin as provided by the RMI, whose database greatly expanded in the past year and which includes all potential countries of origin from the supply chains of all of RMI’s member participants and not just Tesla. Information provided to us by the RMI is aggregated for all conformant smelters in its database and does not necessarily imply use by Tesla of materials sourced from these countries or smelters. In addition, the majority of our suppliers provided information on the smelters used in their entire operations at the company level, and not just for products specifically purchased by Tesla.

 

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Annex II

Smelters Identified

Tesla suppliers identified more than 600 unique smelter names across all CMRT responses received. As part of our due diligence process, we identified 297, or 49%, as valid smelters and 233, or 78%, as conformant. Identification was performed by both Tesla’s engaged third-party service provider as well as an internal review of smelter names as compared to the RMI’s smelter database. We are encouraged by the continued upward trend of smelters participating in RMI’s RMAP, and the positive results within our own supply chain of increased conformant smelters. As we continue to engage with smelters directly and through stakeholder initiatives, such as the RMI’s RMAP, we hope to see these smelter conformance rates continue to increase.

Smelter Summary

The following list of facilities are smelters or refiners believed to be in Tesla’s supply chain who have completed the RMAP audit program and are listed as conformant for responsible sourcing practices. We publish this list to hold these smelters and refiners accountable and to give credit for their continued participation in the RMAP. In addition, we hope that this encourages the remaining smelters and refiners in our supply chain to accelerate their efforts to demonstrate responsible mineral procurement through the RMAP.

 

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