[Federal Register Volume 76, Number 110 (Wednesday, June 8, 2011)]
[Notices]
[Pages 33402-33406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-14183]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2011-0070]


Tesla Motors, Inc.; Receipt of Petition for Renewal of Temporary 
Exemption from the Advanced Air Bag Requirements of FMVSS No. 208

AGENCY: National Highway Traffic Safety Administration (NHTSA), 
Department of Transportation (DOT).

ACTION: Notice of receipt of a petition for renewal of a temporary 
exemption from certain provisions of Federal Motor Vehicle Safety 
Standard (FMVSS) No. 208, Occupant Crash Protection.

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SUMMARY: In accordance with the procedures in 49 CFR Part 555, Tesla 
Motors, Inc., has petitioned the agency for renewal of a temporary 
exemption from certain advanced air bag requirements of FMVSS No. 208. 
The basis for the application is that the petitioner avers that 
compliance would cause it substantial economic hardship and that it has 
tried in good faith to comply with the standard.\1\ This notice of 
receipt of an application for renewal of temporary exemptions is 
published in accordance with statutory and administrative provisions. 
NHTSA has made no judgment on the merits of the application.
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    \1\ To view the applications, go to http://www.regulations.gov 
and enter the docket number set forth in the heading of this 
document.

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DATES: You should submit your comments not later than July 8, 2011.

FOR FURTHER INFORMATION CONTACT: David Jasinski, Office of the Chief 
Counsel, NCC-112, National Highway Traffic Safety Administration, 1200 
New Jersey Avenue, SE., West Building 4th Floor, Room W41-213, 
Washington, DC 20590. Telephone: (202) 366-2992; Fax: (202) 366-3820.

ADDRESSES: We invite you to submit comments on the application 
described above. You may submit comments identified by docket number at 
the heading of this notice by any of the following methods:
     Web Site: http://www.regulations.gov. Follow the 
instructions for submitting comments on the electronic docket site by 
clicking on ``Help and Information'' or ``Help/Info.''
     Fax: 1-202-493-2251.
     Mail: U.S. Department of Transportation, Docket 
Operations, M-30, Room W12-140, 1200 New Jersey Avenue, SE., 
Washington, DC 20590.
     Hand Delivery: 1200 New Jersey Avenue, SE., West Building 
Ground Floor, Room W12-140, Washington, DC, between 9 am and 5 pm, 
Monday through Friday, except Federal Holidays.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.
    Instructions: All submissions must include the agency name and 
docket number. Note that all comments received will be posted without 
change to http://www.regulations.gov, including any personal 
information provided. Please see the Privacy Act discussion below. We 
will consider all comments received before the close of business on the 
comment closing date indicated above. To the extent possible, we will 
also consider comments filed after the closing date.
    Docket: For access to the docket to read background documents or 
comments received, go to http://www.regulations.gov at any time or to 
1200 New Jersey Avenue, SE., West Building Ground Floor, Room W12-140, 
Washington, DC 20590, between 9 am and 5 pm, Monday through Friday,

[[Page 33403]]

except Federal Holidays. Telephone: (202) 366-9826.
    Privacy Act: Anyone is able to search the electronic form of all 
comments received into any of our dockets by the name of the individual 
submitting the comment (or signing the comment, if submitted on behalf 
of an association, business, labor union, etc.). You may review DOT's 
complete Privacy Act Statement in the Federal Register published on 
April 11, 2000 (Volume 65, Number 70; Pages 19477-78) or you may visit 
http://www.dot.gov/privacy.html.
    Confidential Business Information: If you wish to submit any 
information under a claim of confidentiality, you should submit three 
copies of your complete submission, including the information you claim 
to be confidential business information, to the Chief Counsel, NHTSA, 
at the address given under FOR FURTHER INFORMATION CONTACT. In 
addition, you should submit two copies, from which you have deleted the 
claimed confidential business information, to Docket Management at the 
address given above. When you send a comment containing information 
claimed to be confidential business information, you should include a 
cover letter setting forth the information specified in our 
confidential business information regulation (49 CFR part 512).

SUPPLEMENTARY INFORMATION: 

I. Advanced Air Bag Requirements and Small Volume Manufacturers

    In 2000, NHTSA upgraded the requirements for air bags in passenger 
cars and light trucks, requiring what are commonly known as ``advanced 
air bags.'' \2\ The upgrade was designed to meet the twin goals of 
improving protection for occupants of all sizes, belted and unbelted, 
in moderate-to-high-speed crashes, and of minimizing the risks posed by 
air bags to infants, children, and other occupants, especially in low-
speed crashes.
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    \2\ See 65 FR 30680 (May 12, 2000).
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    The issuance of the advanced air bag requirements was a culmination 
of a comprehensive plan that the agency announced in 1996 to address 
the adverse effects of air bags. This plan also included an extensive 
consumer education program to encourage the placement of children in 
rear seats.
    The new requirements were phased-in, beginning with the 2004 model 
year. Small volume manufacturers were not subject to the advanced air 
bag requirements until the end of the phase-in period, i.e., September 
1, 2006.
    In recent years, NHTSA has addressed a number of petitions for 
exemption from the advanced air bag requirements of FMVSS No. 208. The 
majority of these requests have come from small manufacturers, each of 
which has petitioned on the basis that compliance would cause it 
substantial economic hardship and that it has tried in good faith to 
comply with the standard. In recognition of the more limited resources 
and capabilities of small motor vehicle manufacturers, authority to 
grant exemptions based on substantial economic hardship and good faith 
efforts was added to the Vehicle Safety Act in 1972 to enable the 
agency to give those manufacturers additional time to comply with the 
Federal safety standards.
    NHTSA has granted a number of these petitions, usually in 
situations in which the manufacturer is supplying standard air bags in 
lieu of advanced air bags.\3\ In addressing these petitions, NHTSA has 
recognized that small manufacturers may face particular difficulties in 
acquiring or developing advanced air bag systems.
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    \3\ See, e.g., grant of petition to Panoz, 72 FR 28759 (May 22, 
2007), or grant of petition to Koenigsegg, 72 FR 17608 (April 9, 
2007).
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    Notwithstanding those previous grants of exemption, NHTSA is 
considering two key issues--
    (1) whether it is in the public interest to continue to grant such 
petitions, particularly in the same manner as in the past, given the 
number of years these requirements have now been in effect and the 
benefits of advanced air bags, and
    (2) to the extent such petitions are granted, what plans and 
countermeasures to protect child and infant occupants, short of 
compliance with the advanced air bags, should be expected.

While the exemption authority was created to address the problems of 
small manufacturers and the agency wishes to be appropriately attentive 
to those problems, it was not anticipated by the agency that use of 
this authority would result in small manufacturers being given much 
more than relatively short term exemptions from recently implemented 
safety standards, especially those addressing particularly significant 
safety problems.
    Given the passage of time since the advanced air bag requirements 
were established and implemented, and in light of the benefits of 
advanced air bags, NHTSA is considering whether it is in the public 
interest to continue to grant exemptions from these requirements, 
particularly under the same terms as in the past. The costs of 
compliance with the advanced air bag requirements of FMVSS No. 208 are 
costs that all entrants to the U.S. automobile marketplace should 
expect to bear. Furthermore, NHTSA understands that, in contrast to the 
initial years after the advanced air bag requirements went into effect, 
low volume manufacturers now have access to advanced air bag 
technology. Accordingly, NHTSA tentatively concludes that the expense 
of advanced air bag technology is not now sufficient, in and of itself, 
to justify the grant of a petition for a hardship exemption from the 
advanced air bag requirements.
    NHTSA further notes that the granting of exemptions from motor 
vehicle safety standards is subject to the agency's finding that the 
petitioning manufacturer has ``tried to comply with the standard in 
good faith.'' \4\ In response to prior petitions, NHTSA has granted 
temporary exemptions from the advanced air bag requirements as a means 
of affording eligible manufacturers an additional transition period to 
comply with the exempted standard. In deciding whether to grant an 
exemption based on substantial economic hardship and good faith 
efforts, NHTSA considers the steps that the manufacturer has already 
taken to achieve compliance, as well as the future steps the 
manufacturer plans to take during the exemption period and the 
estimated date by which full compliance will be achieved.\5\
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    \4\ 49 U.S.C. 30113(b)(3)(B)(i)
    \5\ 49 CFR 555.6(a)(2)
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    NHTSA invites comment on whether and in what circumstances (e.g., 
nature of vehicles, number of vehicles, level of efforts to comply with 
the requirements, timing as to number of years since the requirements 
were implemented, etc.) it should continue to grant petitions for first 
time exemptions from the advanced air bag requirements of FMVSS No. 208 
and petitions for renewed exemptions from those requirements. We note 
that any policy statements we may make in this area would not have the 
effect of precluding manufacturers from submitting subsequent petitions 
for exemption. However, we believe it could be helpful for 
manufacturers to know our general views in advance of submitting a 
petition.
    We also request comment on the issue of, to the extent any future 
hardship exemptions from the advanced air bag requirements are granted, 
what plans and countermeasures to protect child and infant occupants, 
short of compliance with the advanced air bag requirements, should be 
expected. In

[[Page 33404]]

this regard, we note the agency is authorized to condition the granting 
of exemptions on such terms as the Secretary considers appropriate.\6\ 
In responding to some recent petitions for exemption from the advanced 
air bag requirements of FMVSS No. 208, NHTSA has considered the fact 
that the petitioner planned to install some countermeasures for the 
protection of child passengers.\7\
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    \6\ 49 U.S.C. 30113(b).
    \7\ See, e.g., grant of petition of Think Technology AS, 74 FR 
40634-01 (Aug. 12, 2009); grant of petition of Ferrari S.p.A., 74 FR 
36303-02 (July 22, 2009).
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    NHTSA also invites comment on the likelihood that a child or infant 
will be a passenger in any vehicles that would be produced and sold in 
the U.S. under the requested exemption.

II. Statutory Authority for Temporary Exemptions

    The National Traffic and Motor Vehicle Safety Act (Safety Act), 
codified as 49 U.S.C. Chapter 301, provides the Secretary of 
Transportation authority to exempt, on a temporary basis and under 
specified circumstances, motor vehicles from a motor vehicle safety 
standard or bumper standard. This authority is set forth at 49 U.S.C. 
30113. The Secretary has delegated the authority for implementing this 
section to NHTSA.
    The Act authorizes the Secretary to grant a temporary exemption to 
a manufacturer of not more than 10,000 motor vehicles annually, on such 
terms as he deems appropriate, if he finds that the exemption would be 
consistent with the public interest and the Safety Act and if he also 
finds that ``compliance with the standard would cause substantial 
economic hardship to a manufacturer that has tried to comply with the 
standard in good faith.''
    The Act also authorizes the Secretary to grant a temporary 
exemption from a standard, for not more than 2,500 motor vehicles per 
year, to a manufacturer of any size, on such terms as he deems 
appropriate, if he finds that the exemption would be consistent with 
the public interest and the Safety Act and if he also finds either that
    [squf] The exemption would make easier the development or field 
evaluation of a new motor vehicle safety feature providing a safety 
level at least equal to the safety level of the standard;
    [squf] The exemption would make the development or field evaluation 
of a low-emission motor vehicle easier and would not unreasonably lower 
the safety level of that vehicle; or
    [squf] Compliance with the standard would prevent the manufacturer 
from selling a motor vehicle with an overall safety level at least 
equal to the overall safety level of nonexempt vehicles.
    NHTSA established Part 555, Temporary Exemption from Motor Vehicle 
Safety and Bumper Standards, to implement the statutory provisions 
concerning temporary exemptions. Under Part 555, a petitioner must 
provide specified information in submitting a petition for exemption. 
These requirements are specified in 49 CFR 555.5, and include a number 
of items. Foremost among them are that the petitioner must set forth 
the basis of the application under Sec.  555.6, and the reasons why the 
exemption would be in the public interest and consistent with the 
objectives of 49 U.S.C. Chapter 301.
    A manufacturer is eligible to apply for a hardship exemption if its 
total motor vehicle production in its most recent year of production 
did not exceed 10,000 vehicles, as determined by the NHTSA 
Administrator (49 U.S.C. 30113).
    In determining whether a manufacturer of a vehicle meets that 
criterion, NHTSA considers whether a second vehicle manufacturer also 
might be deemed the manufacturer of that vehicle. The statutory 
provisions governing motor vehicle safety (49 U.S.C. Chapter 301) do 
not state that a manufacturer has substantial responsibility as 
manufacturer of a vehicle simply because it owns or controls a second 
manufacturer that assembled that vehicle. However, the agency considers 
the statutory definition of ``manufacturer'' (49 U.S.C. 30102) to be 
sufficiently broad to include sponsors, depending on the circumstances. 
Thus, NHTSA has stated that a manufacturer may be deemed to be a 
sponsor and thus a manufacturer of a vehicle assembled by a second 
manufacturer if the first manufacturer had a substantial role in the 
development and manufacturing process of that vehicle.
    While 49 U.S.C. 30113(b) states that exemptions from a Safety Act 
standard are to be granted on a ``temporary basis,'' \8\ the statute 
also expressly provides for renewal of an exemption on reapplication. 
Manufacturers are nevertheless cautioned that the agency's decision to 
grant an initial petition in no way predetermines that the agency will 
repeatedly grant renewal petitions, thereby imparting semi-permanent 
status to an exemption from a safety standard. Exempted manufacturers 
seeking renewal must bear in mind that the agency is directed to 
consider financial hardship as but one factor, along with the 
manufacturer's ongoing good faith efforts to comply with the 
regulation, the public interest, consistency with the Safety Act, 
generally, as well as other such matters provided in the statute.
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    \8\ 49 U.S.C. 30113(b)(1).
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    Finally, we note that under 49 CFR 555.8(e), ``If an application 
for renewal of temporary exemption that meets the requirements of Sec.  
555.5 has been filed not later than 60 days before the termination date 
of an exemption, the exemption does not terminate until the 
Administrator grants or denies the application for renewal.'' This 
petition for renewal has been submitted by the deadline stated in 49 
CFR 555.8(e).

III. Overview of Petition

    In accordance with 49 U.S.C. 30113 and the procedures in 49 CFR 
Part 555, Tesla Motors, Inc., (Tesla) has submitted a petition asking 
the agency for renewal of its temporary exemption from certain advanced 
air bag requirements of FMVSS No. 208. The basis for the application is 
that compliance would cause the petitioner substantial economic 
hardship and that the petitioner has tried in good faith to comply with 
the standard. Tesla has requested a renewal of its exemption for a 
period of two years from January 29, 2011 to January 28, 2013.
    Tesla is petitioning for renewal of its exemption from certain 
requirements of FMVSS No. 208, Occupant Crash Protection. Specifically, 
the petition requests an exemption from the advanced air bag 
requirements (S14), with the exception of the belted, rigid barrier 
provisions of S14.5.1(a); the rigid barrier test requirement using the 
5th percentile adult female test dummy (belted and unbelted, S15); the 
offset deformable barrier test requirement using the 5th percentile 
adult female test dummy (S17); and the requirements to provide 
protection for infants and children (S19, S21, and S23). Tesla has 
requested a two-year extension of its exemption, from January 28, 2011 
to January 28, 2013, for the Roadster model.
    In a Federal Register document dated January 28, 2008, Tesla was 
granted a temporary exemption from the advanced air bag requirements of 
FMVSS No. 208 listed above for the Roadster.\9\ The exemption was 
granted for the period from the date of publication until January 28, 
2011. The basis for the grant was that compliance with the advanced air 
bag requirements of FMVSS No. 208 would cause substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
the standard and that

[[Page 33405]]

such exemption was in the public interest and consistent with the 
objectives of traffic safety.
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    \9\ 73 FR 4944 (Docket No. NHTSA-2008-0013).
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    In a November 24, 2010 petition, Tesla sought renewal of its 
exemption. The basis for Tesla's application is substantial economic 
hardship to a manufacturer that has tried in good faith to comply with 
the standard. Tesla is a Delaware corporation headquartered in 
California with sales offices throughout the United States and 
overseas. Tesla currently manufactures and sells only one vehicle, the 
Roadster. Tesla has sold or leased 287 Roadsters in the 12 months prior 
to filing its petition for extension. Tesla states that it continues to 
be eligible for a financial hardship exemption, and that it has 
suffered substantial losses and will continue to do so while selling 
the Roadster.
    Tesla began production of the all-electric Roadster in 2008. The 
Roadster has a single-speed electrically actuated automatic 
transmission and three phase, four pole AC induction motor. The 
Roadster has a combined range of 245 miles on a single charge. Under an 
agreement with Group Lotus plc (Lotus), Tesla purchases the Roadster 
``glider,'' which uses the chassis and several other systems of the 
Lotus Elise. The gliders are manufactured under Tesla's supervision and 
direction at a Lotus factory in the United Kingdom and then shipped to 
Menlo Park, California, where installation of the power train and other 
final steps are taken prior to sale of the vehicle in the United 
States. Tesla asserts that Lotus will cease manufacturing Roadster 
gliders in December 2011, and Tesla plans to finish production in early 
2012 and offer remaining Roadsters for sale during 2012.
    According to Tesla, the Roadster was conceived as a limited proof-
of-concept for later generations of Tesla vehicles. Tesla intends to 
introduce its next electric vehicle, a four-door fully electric sedan 
known as the Model S. Tesla states that the Model S would meet or 
exceed all FMVSSs in effect by the time the vehicle is released for 
production in 2012.
    Tesla contends that it is eligible for an economic hardship 
exemption. Tesla has produced fewer than 10,000 vehicles since the 
company's founding in 2003. Worldwide production of the Roadster for 
calendar year 2010 will be approximately 600 to 700 vehicles. Tesla 
also states that it will not produce more than 10,000 vehicles 
(combined Roadster and Model S production) per year during the 
requested exemption period.
    In the January 2008 notice granting Tesla's original exemption, the 
agency determined that Lotus, as well as Tesla, was considered a 
manufacturer of the Roadster. The basis for this determination was 
information in the prior petition that Lotus would be assembling the 
Roadster. Nevertheless, the agency determined that Tesla was eligible 
for an economic hardship petition because the combined production of 
Lotus and Tesla was fewer than 10,000 vehicles.
    In its petition for extension, Tesla contends that the relationship 
between Lotus and Tesla does not involve ownership, sponsorship, or any 
type of control of one entity over the other. Tesla also reiterates 
that, even if the production of Lotus and Tesla vehicles are combined, 
the total production is far below the threshold 10,000 vehicle per year 
limit for hardship exemptions.
    Tesla cites five reasons why the failure to obtain the requested 
extension of its exemption would cause substantial economic hardship. 
First, Tesla has incurred cumulative net losses of $360 million since 
inception through September 30, 2010, and a net loss of $100 million 
for the first nine months of 2010. Tesla also expects cumulative losses 
to almost double before launch of the Model S. Second, Tesla contends 
that the loss of the ability to sell the Roadster in the United States 
would cause Tesla to incur severe financial harm, which would 
substantially increase the likelihood of breaching financial covenants 
in its loan documents with the U.S. Department of Energy, potentially 
depriving Tesla of a source of capital. Third, Tesla has committed 
certain remaining costs for the Roadster that cannot be cancelled, such 
as a fixed supply contract with Lotus and other suppliers until the end 
of 2011. Fourth, Tesla contends that ending U.S. sales of the Roadster 
would require Tesla to refund $2.4 million in deposits on Roadster 
reservations, exacerbating its financial hardship. Fifth, because the 
Roadster is the only Tesla model available in the United States, Tesla 
states that cancellation of the program would result in a significant 
loss of market share.
    Tesla also contends that Lotus, and by extension Tesla, has exerted 
good faith efforts to achieve compliance with the advanced air bag 
requirements. Tesla notes that the Roadster shares a number of common 
components and systems with the Lotus Elise, including the passive 
safety systems. Tesla believes that, for the reasons outlined in 
Lotus's petition for an extension of its FMVSS No. 208 exemption for 
the Elise, Lotus has exerted good faith efforts to comply with the 
advanced air bag requirements.\10\ Furthermore, Tesla states that it is 
in no better position than Lotus to develop an advanced air bag system 
for the Elise-based Roadster. Like the Lotus Elise, the Tesla Roadster 
is coming to the end of its model life. Given the limited number of 
Roadsters planned for production, Tesla believes that developing an 
advanced air bag system for the Roadster at this time is economically 
impracticable. Tesla also contends that it has been using the three 
years of its current exemption to develop the Model S, which will 
include advanced air bags.
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    \10\ Tesla has included, as an attachment to its petition, a 
copy of Lotus's petition for an extension of its temporary exemption 
from certain provisions of FMVSS No. 208. That petition is being 
considered separately. A separate notice of receipt published in 
today's Federal Register addresses Lotus's petition.
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    Tesla also contends that the requested extension of its exemption 
is in the public interest for five reasons. First, Tesla states that 
granting the petition would encourage development and sale of highway-
capable electric vehicles by Tesla and other manufacturers. Second, 
Tesla contends that the public interest considerations supporting other 
similar extension petitions previously granted by NHTSA exist for Tesla 
as well. Third, Tesla states that the Roadster has a high degree of 
safety because of its design. Even without advanced air bags, Tesla 
believes that the requested exemption would have a negligible impact on 
vehicle safety because of the limited number of vehicles that would be 
sold in the United States under the extension. Fourth, Tesla contends 
that the Roadster does not pose an unreasonable risk to safety of 
infants or children because young children are unlikely to be 
passengers in the Roadster and neither Tesla nor Lotus has received any 
complaints, reports, or information of air-bag-related injuries. Fifth, 
Tesla contends that granting its petition will have a positive impact 
on U.S. employment in the automotive industry, and that denying its 
petition would not only directly impact the jobs of current Tesla 
employees supporting the Roadster, but also potentially compromise the 
company's ability to move forward with the Model S.

IV. Completeness and Comment Period

    Upon receiving a petition, NHTSA conducts an initial review of the 
petition with respect to whether the petition is complete and whether 
the petitioner appears to be eligible to apply for the requested 
petition. The agency has tentatively concluded that the petition from 
Tesla is complete and that Tesla is eligible for an extension of its

[[Page 33406]]

temporary exemption. The agency has not made any judgment on the merits 
of the application, and is placing a non-confidential copy of the 
petition in the docket.
    We are providing a 30-day comment period. After considering public 
comments and other available information, we will publish a notice of 
final action on the application in the Federal Register.

    Issued on: June 1, 2011.
Christopher J. Bonanti
Associate Administrator for Rulemaking.
[FR Doc. 2011-14183 Filed 6-7-11; 8:45 am]
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