Tesla 2012 Annual Report Download - page 22

Table of Contents
As a small volume manufacturer that produces only electric vehicles, we have applied for, and have been granted, exemptions from certain
advanced air bag and electronic stability control requirements, which apply to Tesla Roadsters manufactured through November 7, 2011. Under
U.S. law, we are required to certify compliance with, or obtain exemption from all applicable federal motor vehicle safety standards and we have
done so with respect to each vehicle we have offered for sale in the United States. Based on testing, engineering analysis, and other information,
we have certified that the Tesla Roadster complies with, or is exempt from all applicable NHTSA standards by affixing a certification label to
each Tesla Roadster sold.
We are also required to comply with other requirements of federal laws administered by NHTSA, including the Corporate Average Fuel
Economy standards, consumer information labeling requirements, early warning reporting requirements regarding warranty claims, field reports,
death and injury reports and foreign recalls, and owner’s manual requirements.
Our vehicles sold in Europe are subject to European Union safety testing regulations. Many of those regulations, referred to as European
Union Whole Vehicle Type Approval (WVTA), are different from the federal motor vehicle safety standards applicable in the United States and
may require redesign and/or retesting. Our Tesla Roadsters are currently approved for sale on a limited basis in the European Union via the
Small Series WVTA, which permits the manufacture and sale in the European Union of no more than 1,000 vehicles per year. Since we have
fewer than 1,000 Tesla Roadsters left to sell, we have no plans to commence testing our Tesla Roadsters for the WVTA to assure compliance
with the European Union requirements to permit unlimited sales. Similarly, Australia and Japan have additional testing regulations applicable to
high volume manufacturers. We also plan to keep Australian and Japanese sales of our Tesla Roadsters at a low volume, and have no plans to
comply with the Australian and Japanese requirements to permit high volume sales in these jurisdictions. In connection with the introduction of
the Tesla Roadster in Australia and Japan, we conducted a frontal impact test based on European Union testing standards on the Tesla Roadster
in November 2009, which is required for sales exceeding certain annual volumes outside the United States. While the Tesla Roadster met most
of the criteria for occupant protection and all criteria for high voltage safety in the front impact crash test, there were two criteria that were not
met in the test. Based on our analysis of additional compliance options in Australia and Japan, we believe such an outcome should not limit our
ability to sell the Tesla Roadster in Australia below certain annual volumes or, subject to compliance with certain Japanese import rules, have a
material impact on our ability to sell Tesla Roadsters in Japan.
The Federal Trade Commission (FTC) requires us to calculate and display the range of our electric vehicles on a label we affix to the
vehicle’s window. The FTC specifies that we follow testing requirements set forth by the Society of Automotive Engineers (SAE) which further
requires that we test using the United States EPA’s combined city and highway testing cycles. In July 2011, the EPA announced new energy
efficiency testing methodologies for electric vehicles. These new requirements, when applied to our vehicles, could reduce the advertised range
of our vehicles by up to 30% as compared to methodologies we have used to estimate the range of the vehicles at a steady speed of 55 miles per
hour. Shortly after the EPA issued their new requirements, the FTC issued a proposed rule that would harmonize current FTC label requirements
with the EPA’s new fuel economy label requirements. If finalized, changes to the testing cycles previously utilized could impair our ability to
deliver Model S with the previously advertised range based on the steady speed of 55 miles per hour range methodology, which could result in
the cancellation of a number of the over 8,000 reservations that have been placed for Model S as of December 31, 2011. Although the real life
customer experience of the range of our electric vehicles will not change due to the changes in the FTC or EPA standards, the reduction in the
advertised range could negatively impact our sales and harm our business.
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Windshield defrosting and defogging
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defined zones of the windshield must be cleared within a specified timeframe; and
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Rearview mirror requirements
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rearward areas that must be visible to the driver via the mirrors.