Tesla 2016 Annual Report Download - page 12

Asamanufacturer,wemustself-certifythatourvehiclesmeetallapplicableFMVSS,aswellastheNHTSAbumperstandard,orotherwiseareexempt,
beforethevehiclescanbeimportedorsoldintheUnitedStates.NumerousFMVSSapplytoourvehicles,suchascrash-worthinessrequirements,crashavoidance
requirements,andelectricvehiclerequirements.WearealsorequiredtocomplywithotherfederallawsadministeredbyNHTSA,includingtheCAFEstandards,T
heftPreventionActrequirements,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.
TheAutomobileInformationandDisclosureActrequiresmanufacturersofmotorvehiclestodisclosecertaininformationregardingthemanufacturer’s
suggestedretailprice,optionalequipmentandpricing.Inaddition,theActallowsinclusionofcityandhighwayfueleconomyratings,asdeterminedbyEPA,as
wellascrashtestratingsasdeterminedbyNHTSAifsuchtestsareconducted.
OurvehiclessoldinoutsideoftheU.S.aresubjecttoforeignsafetytestingregulations.Manyofthoseregulationsaredifferentfromthefederalmotor
vehiclesafetystandardsapplicableintheUnitedStatesandmayrequireredesignand/orretesting.
Regulation—Battery Safety and Testing
Ourbatterypackconformstomandatoryregulationsthatgoverntransportof“dangerousgoods”,definedtoincludelithium-ionbatteries,whichmaypresent
ariskintransportation.Theregulationsvarybymodeofshippingtransportation,suchasbyoceanvessel,rail,truck,orair.Wehavecompletedtheapplicable
transportationtestsforourbatterypacks,demonstratingourcompliancewithapplicableregulations.
Weuselithiummetaloxidecellsinourhighvoltagebatterypacks.Thecellsdonotcontainanylead,mercury,cadmium,otherhazardousmaterials,heavy
metals,ortoxicmaterials.Ourbatterypacksincludecertainpackagingmaterialsthatcontaintraceamountsofhazardouschemicalswhoseuse,storage,and
disposalisregulatedunderfederallaw.Wecurrentlyhaveanagreementwithathirdpartybatteryrecyclingcompanytorecycleourbatterypacks.Ifacustomer
wishestodisposeofabatterypackfromoneofourvehicles,weanticipateacceptingthedepletedbatteryfromthecustomerwithoutanyadditionalcharge.
Automobile Manufacturer and Dealer Regulation
Statelawsregulatethemanufacture,distribution,andsaleofautomobiles,andgenerallyrequiremotorvehiclemanufacturersanddealerstobelicensedin
ordertosellvehiclesdirectlytoconsumersinthestate.AsweopenadditionalTeslastoresandservicecenters,wesecuredealerlicenses(ortheirequivalent)and
engageinsalesactivitiestosellourvehiclesdirectlytoconsumers.Afewstates,suchasTexasandMichigan,donotpermitautomobilemanufacturerstobe
licensedasdealersortoactinthecapacityofadealer,orotherwiserestrictamanufacturer’sabilitytodeliverorservicevehicles.Tosellvehiclestoresidentsof
stateswherewearenotlicensedasadealer,wegenerallyconductthesaleoutofthestateviatheinternet,phoneormail.Insuchstates,wehaveopened“galleries”
thatserveaneducationalpurposeandarenotretaillocations.
AsweexpandourretailfootprintintheUnitedStates,someautomobiledealertradeassociationshavebothchallengedthelegalityofouroperationsincourt
andusedadministrativeandlegislativeprocessestoattempttoprohibitorlimitourabilitytooperateexistingstoresorexpandtonewlocations.Althoughwehave
thusfarprevailedineverylawsuitbroughtbydealerassociations,weexpectthatthedealerassociationswillcontinuetomountchallengestoourbusinessmodel.In
addition,weexpectthedealerassociationstoactivelylobbystatelicensingagenciesandlegislatorstointerpretexistinglawsorenactnewlawsinwaysnot
favorabletoTesla’sownershipandoperationofitsownretailandservicelocations.
WhilewehaveanalyzedtheprincipallawsintheUS,EU,China,Japan,UK,andAustraliarelatingtoourdistributionmodelandbelievewecomplywith
suchlaws,wehavenotperformedacompleteanalysisofalljurisdictionsinwhichwemaysellvehicles.Accordingly,theremaybelawsincertainjurisdictions
thatmayrestrictoursalesandserviceoperations.
Competition
Theworldwideautomotivemarket,particularlyforalternativefuelvehicles,ishighlycompetitivetodayandweexpectitwillbecomeevenmoresointhe
futureasweintroduceadditional,lowerpricedvehiclessuchasourModel3.
Webelievetheprimarycompetitivefactorsinourmarketsincludebutarenotlimitedto:
·technologicalinnovation;
·productqualityandsafety;
·serviceoptions;
·productperformance;
·designandstyling;
·brandperception;
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