Tesla Motors, Inc. Grant of Petition for Renewal of a Temporary Exemption From the Advanced Air Bag Requirements of FMVSS No. 208

Topics:  National Highway Traffic Safety Administration, Tesla Roadster

David L. Strickland
Federal Register
September 28, 2011

[Federal Register Volume 76, Number 188 (Wednesday, September 28, 2011)]
[Notices]
[Pages 60118-60123]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-24897]


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DEPARTMENT OF TRANSPORTATION

National Highway Traffic Safety Administration

[Docket No. NHTSA-2011-0070]


Tesla Motors, Inc. Grant of Petition for Renewal of a 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 grant 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: This notice grants the petition of Tesla Motors, Inc. (Tesla) 
for the renewal of a temporary exemption of its Roadster model from the 
advanced air bag requirements of FMVSS No. 208. The basis for the 
exemption is that compliance with the standard would cause substantial 
economic hardship to a manufacturer that has tried to comply with the 
standard in good faith.

DATES: The exemption remains in effect until November 7, 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 W41-326, 
Washington, DC 20590. Telephone: (202) 366-2992; Fax: (202) 366-3820.

SUPPLEMENTARY INFORMATION: 

I. Advanced Air Bag Requirements and Small Volume Manufacturers

    In general, frontal air bags for drivers and right front passengers 
have large net benefits. NHTSA estimates that they saved 30,232 lives 
from 1987 through the end of 2009.\1\ Air bags reduce overall fatality 
risk in purely frontal crashes by 29 percent. They reduce overall 
fatality risk by 12 percent for drivers of passenger cars, and by 14 
percent for right front passengers of passenger cars.\2\
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    \1\ Traffic Safety Facts--2009 Data--Occupant Protection, NHTSA 
Report No. DOT HS 811 390, Washington, DC 2010.
    \2\ Kahane, C.J., Lives Saved by the Federal Motor Vehicle 
Safety Standards and Other Vehicle Safety Technologies, 1960-2002, 
NHTSA Technical Report No. DOT HS 809 833, Washington, 2004, pp. 
108-115.
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    In 2000, NHTSA published a final rule that upgraded the 
requirements for air bags in passenger cars and light trucks, requiring 
what are commonly known as ``advanced air bags.'' \3\ 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. The agency estimated 
that the upgraded requirements had the potential to reduce fatalities 
and nonfatal injuries from crashes, as well as protect more than 95 
percent of the at-risk population (out-of-position infants, children, 
and small-statured adults) from the risks presented by air bag 
deployment.
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    \3\ 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 some air bag designs. 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

[[Page 60119]]

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.\4\ In addressing these petitions, NHTSA 
recognized that small manufacturers faced particular difficulties in 
acquiring or developing advanced air bag systems. Specifically, the 
agency noted that major air bag suppliers initially concentrated their 
efforts on working with large volume manufacturers and small volume 
manufacturers had limited access to advanced air bag technology.
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    \4\ See, e.g., Grant of petition of Panoz, 72 FR 28759 (May 22, 
2007); Grant of petition of Koenigsegg Automotive AB, 72 FR 17608 
(April 9, 2007).
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    Notwithstanding those previous grants of exemption, NHTSA has 
considered 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 bag requirements, should be expected.
    The agency requested comments on these issues in recent notices of 
receipt, including the one for Tesla.
    Over time, the number of petitions for exemption from the advanced 
air bag requirements has decreased, and several small manufacturers 
that previously received exemptions now produce vehicles that comply 
with the advanced air bag requirements. The majority of current 
petitions before the agency are petitions for limited extension of 
previously granted exemptions.
    We discuss comments concerning this issue that were submitted in 
response to the notice of receipt of the Tesla petition later in this 
document.

II. Statutory Basis for Requested Part 555 Exemption

    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 the Secretary deems appropriate, if the Secretary finds that 
the exemption would be consistent with the public interest and also 
finds that compliance with the standard would cause substantial 
economic hardship to the manufacturer and that the manufacturer has 
tried to comply with the standard in good faith.
    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,'' \5\ 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 on-going 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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    \5\ 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.'' In the 
case of the petition for renewal from Tesla, the petition for renewal 
was 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, Occupant Crash Protection. 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. In its petition, Tesla requested a 
renewal of its exemption for a period of two years from January 29, 
2011, to January 28, 2013 for the Roadster model.
    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).
    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.\6\ The exemption was 
granted for the period from the date of publication until January 28, 
2011. The

[[Page 60120]]

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 such exemption was in the public interest and 
consistent with the objectives of traffic safety.
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    \6\ 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 sells only one vehicle, the Roadster. Tesla 
has sold or leased 287 Roadsters in the 12 months prior to filing its 
petition for renewal. 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 in its petition that Lotus will cease 
manufacturing Roadster gliders in December 2011, and that 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 renewal, 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 multiple 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 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. Third, 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. Additionally, 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 renewal of its FMVSS No. 208 exemption for the 
Elise, Lotus has exerted good faith efforts to comply with the advanced 
air bag requirements. 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.
    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. Notice of Receipt and Summary of Comments

    On June 8, 2011, we published in the Federal Register (76 FR 33402) 
a notice of receipt of Tesla's petition for renewal of a temporary 
exemption, and provided an opportunity for public comment. We received 
three comments, two comments from the Advocates for Highway & Auto 
Safety (Advocates) and one from Tesla.
    Advocates first responded to NHTSA's request for comment regarding 
whether and under what circumstances the agency should continue to 
grant temporary exemptions from the advanced air bag requirements. 
Advocates concurred with NHTSA's concerns regarding the continuation of 
such exemptions. The organization noted that air bag technology is over 
35

[[Page 60121]]

years old, the current requirements for advanced air bags are over ten 
years old and full compliance has been required for over five years. 
Advocates further noted that the FMVSSs are minimum performance 
requirements necessary for occupant protection and while the cost of 
production may impose an excessive burden when the technology is new, 
over time public safety concerns for vehicle occupants must outweigh 
manufacturer production costs, which the organization argued is 
especially true for manufacturers of high-end vehicles. Finally, 
Advocates noted that although physical testing is an essential 
component of the regulatory validation process, significant reductions 
in development costs have been realized through advanced computer 
simulation and should be considered when reviewing exemption petitions.
    Advocates also recommended revising the petition process to create 
a rebuttable presumption that cost alone cannot provide a basis for a 
temporary exemption beyond four years following the compliance date. 
Additionally, the organization recommended that NHTSA require 
applicants to make a showing regarding recent advances in state-of-the-
art research, design, and development that pertain to the requirements 
for which exemption is requested and explain why an exemption is still 
necessary.
    Regarding Tesla's petition, Advocates noted that the company 
requests exemption from the unbelted test of the 50th percentile male 
occupant and the belted and unbelted tests of the 5th percentile adult 
female driver, and the out-of-position portions of the advanced air bag 
requirements for all children. Advocates asserted that in developing 
and testing air bag systems to meet these requirements, Tesla would 
only need to perform component level tests rather than more expensive 
full vehicle tests. Alternatively, Advocates stated that Tesla could 
meet these requirements by using an occupant detection system to 
suppress air bag deployment in specified situations, which, according 
to Advocates, costs approximately $1,500. Advocates argued that Tesla 
had multiple ways to meet the requirements without being granted an 
extension of its exemption.
    Advocates also addressed Tesla's assertions that an extension of 
its exemption would be consistent with the public interest and the 
objectives of the Safety Act. Specifically, Advocates stated that every 
safety regulation was developed for a specific reason and intended to 
provide a specific level of protection, and that the fact that the 
vehicle will meet other safety requirements does not address the safety 
concerns that caused NHTSA to promulgate the requirements from which 
Tesla seeks exemption.
    Advocates further argued that exemptions should not be based upon 
assumptions of the occupant population. The organization noted that, 
although many consumers would not purchase a Tesla Roadster as the 
primary means of transporting their children, there was no reason why 
Tesla vehicles would not be used to transport children and, in vehicles 
with two seats, any child riding in the vehicle would be located in the 
front seat. Additionally, the organization noted that one of the 
requirements from which exemption is sought is meant to address the 
safety of small-statured adult females, and that Tesla did not indicate 
why these women would not be occupants of the vehicles.
    Advocates stated that, based on the foregoing, it could not support 
granting Tesla's petition for renewal of its temporary exemption.
    Finally, Advocates argued that the procedure under which Tesla 
received an automatic extension of its exemption violates 49 U.S.C. 
section 30113(e). That statutory provision provides that an economic 
hardship exemption may not be granted for more than three years. As 
provided by 49 CFR 555.8(e), if a petition for renewal of a temporary 
exemption has been filed not later than 60 days before termination of 
an exemption, the exemption does not terminate until the Administrator 
grants or denies the petition for renewal. Advocates stated that this 
provision allows the agency, through inaction on a petition for renewal 
of an exemption, to extend the three-year limit of an exemption.
    Tesla filed a response to Advocates' comment. With respect to 
Advocates' assertion regarding Tesla's ability to use off-the-shelf 
technology that would cost $1,500 to comply with the advanced air bag 
requirements, Tesla stated that Advocates have understated the 
complexity of advanced air bag technology. Tesla noted that any 
modification to a vehicle requires full testing to ensure appropriate 
operation and compatibility. Further, with respect to the complexity of 
adding new components, Tesla stated that it has relied on the expertise 
of Lotus, whose assertions regarding the compatibility of existing air 
bag components should be given more weight than Advocates' speculative 
arguments.
    With respect to Advocates' assertion regarding the hazard posed by 
the Roadster's existing air bag system, Tesla noted that Advocates have 
not provided data or statistics to validate their assertions. In 
contrast, Tesla stated, it has over 12 million miles of real world 
driving in over 1,800 vehicles without a single report of serious 
injury or death caused by passenger air bags in the Roadster.
    Advocates filed a second comment on the petition, asking the agency 
to take note of its comments filed on Tesla's petition for an exemption 
from the electronic stability control (ESC) requirements of FMVSS No. 
126. Those comments raised two issues pertinent to Tesla's advanced air 
bag petition. First, Advocates believe the agency should consider the 
interaction between multiple exemptions sought by Tesla. Second, 
Advocates expressed a concern that, in its ESC petition, Tesla only 
sought an exemption through December 31, 2010 (later shortened to a 50-
day period ending October 20, 2011),\7\ whereas it sought an advanced 
air bag exemption that would not terminate until January 28, 2013.
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    \7\ Tesla has recently clarified further that it can complete 
production in less than fifty days.
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V. Agency Analysis, Response to Comment, and Decision

    In this section, we provide our analysis and decision regarding 
Tesla's temporary exemption request concerning the advanced air bag 
requirements of FMVSS No. 208, including our response to the comments 
received from Advocates and Tesla.

A. General Issues Related to Petitions for Exemptions From Advanced Air 
Bag Requirements

    As noted earlier, NHTSA requested comments in the notice of receipt 
for the Tesla petition about a number of issues related to the 
justification for continuing to grant petitions for a hardship 
exemption from the advanced air bag requirements. The agency also 
requested comments on these issues in notices of receipt for other 
petitions.
    This is not the first decision document we have issued since 
beginning to request comments on this issue, and we summarized our new 
position earlier in this document. In this section, we address the 
specific comments submitted in response to the notice of receipt for 
the Tesla petition.
    To briefly summarize our new position, and the background for that 
position, the final rule requiring advanced air bags was published in 
2000, and 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

[[Page 60122]]

end of the phase-in period, i.e., September 1, 2006.
    In addressing various petitions for exemption from the advanced air 
bag requirements of FMVSS No. 208 since that time, NHTSA has recognized 
that small manufacturers faced particular difficulties in acquiring or 
developing advanced air bag systems. Specifically, the agency noted 
that major air bag suppliers initially concentrated their efforts on 
working with large volume manufacturers and small volume manufacturers 
had limited access to advanced air bag technology.
    However, 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 has determined that it is not in the public 
interest to continue to grant exemptions from these requirements in the 
same circumstances and 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.\8\ Accordingly, NHTSA has concluded 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.
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    \8\ The recent petitions for exemption support NHTSA's 
conclusion that advanced air bag technology has become more 
accessible to small volume manufacturers in recent years. In 
addition to the fact that several manufacturers who received 
exemptions in the past have been able to produce fully-compliant 
vehicles, many of the manufacturers who have recently sought 
exemption from the advanced air bag requirements have been 
developing advanced air bag systems in-house or are working with 
suppliers to develop such systems. See, e.g., Notice of Receipt of 
Application of Spyker Automobielen, B.V., 76 FR 19179 (Apr. 6, 2011) 
(manufacturer is working with a supplier to develop advanced air bag 
system); Notice of Receipt of Petition of Lotus Cars Ltd., 76 FR 
33406 (June 8, 2011) (manufacturer has another model that fully 
complies with the advanced air bag requirements).
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    Manufacturers are not precluded from submitting petitions for 
exemption in this area, and NHTSA may grant some such exemptions. 
However, manufacturers should understand that the circumstances in 
which we would grant such exemptions is expected to be significantly 
more limited than in the past.
    We are not adopting Advocates' recommendation to change the 
exemption petition process. Although NHTSA may develop general policies 
on certain issues, the agency still analyzes each petition on a case-
by-case basis and believes that this is the best approach for 
addressing the individual circumstances of each manufacturer seeking 
exemption. Moreover, with respect to that organization's suggestion 
that NHTSA should establish a rebuttable presumption that manufacturing 
cost alone cannot provide the basis for an application for a temporary 
exemption from safety requirements beyond four years following the date 
on which compliance with a vehicle safety standard or requirement is 
mandatory, we note that manufacturers should not assume that the agency 
would be likely to grant hardship exemptions based on manufacturing 
cost alone, even within that four-year period. We evaluate all relevant 
information and issues in deciding whether to grant petitions for 
exemptions.

B. Decision on Tesla's Petition

    In response to Tesla's petition, and after considering all of the 
information provided as a response to the notice of receipt of the 
petition, NHTSA has decided to extend Tesla's temporary exemption from 
the advanced air bag requirements of FMVSS No. 208 for a period of 40 
days after publication of notice of this decision in the Federal 
Register. We are not providing a longer exemption in light of the 
production plans set forth by Tesla in its petition for an exemption 
from the ESC requirements of FMVSS No. 126.
    First, we find that Tesla is eligible for an economic hardship 
exemption. As discussed above, 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. 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.
    We have considered whether an entity other than Tesla can be 
considered to manufacture the Roadster. Lotus, based on its involvement 
in the design and manufacture of the Roadster gliders is potentially an 
additional manufacturer of the Roadster.
    However, as we have noted in a prior notice, Lotus is itself a 
small manufacturer and NHTSA granted a temporary exemption from the 
advanced air bag requirements for the Lotus Elise.\9\ Both Tesla and 
Lotus separately meet the requirement that a manufacturer make fewer 
than 10,000 vehicles in a calendar year preceding the petition, 
counting all vehicles they manufacture (including ones that may also be 
attributable to another manufacturer). Given this, we find that Tesla 
continues to be eligible to apply for an economic hardship exemption, 
whether or not Lotus is considered to be a manufacturer of the 
Roadster.
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    \9\ See 71 FR 52851 (Sept. 7, 2006).
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    Based on the information provided in Tesla's petition and its 
comments, NHTSA concludes that Tesla has demonstrated a good faith 
effort to bring its vehicle into compliance with the advanced air bag 
requirements of FMVSS No. 208. NHTSA also concludes that Tesla has 
demonstrated the requisite financial hardship. In reaching the 
conclusion about good faith efforts, we place significant weight on the 
fact that, before seeking renewals of existing exemptions, Tesla and 
Lotus again sought to determine whether it was feasible to include 
advanced air bags on the exempted vehicles.
    As noted earlier, Advocates stated that in developing and testing 
air bag systems for meeting the sections of the standard related to 
out-of-position testing, Tesla only needs to perform component level 
tests as compared to full vehicle tests. It cited a retail price for an 
occupant detection system and claimed that there are cost effective 
alternative ways to meet the specific sections of the regulation 
without being granted an extension.
    In response to Advocates' comment, we note that, in order to meet 
the advanced air bag requirements, Tesla's efforts are not limited to 
achieving compliance with the out-of-position requirements, but its 
vehicle must comply with all of the advanced air bag requirements 
including unbelted crash test requirements and crash test requirements 
using 5th percentile adult female dummies. While Advocates cited a 
retail price for an occupant detection system, it has not provided 
analysis demonstrating how a particular system could be incorporated 
into the Roadster

[[Page 60123]]

or analyzing the cost implications of such a redesign for it in the 
context of an extremely low volume vehicle. As noted earlier, Tesla 
explained in its petition that it has focused on developing advanced 
air bags for its successor vehicle, the Model S. Given the challenges 
that company has cited in meeting the advanced air bag requirements for 
the existing vehicle and the high costs in redesigning vehicles to meet 
the advanced air bag requirements, we believe Tesla's approach is 
consistent with good faith efforts to meet FMVSS No. 208. We caution, 
however, that vehicle manufacturers should not assume that we will 
grant multiple extensions of temporary exemptions because of continuing 
delays in completing the designs of successor vehicles.
    Several factors support a finding that an extension of Tesla's 
exemption is in the public interest. NHTSA has traditionally found that 
the public interest is served by affording consumers a wider variety of 
motor vehicles, by encouraging the development of fuel-efficient and 
alternative-energy vehicles, and providing additional employment 
opportunities. We believe that all three of these public interest 
considerations would be served by granting Tesla's petition and note 
that the denial of this request would remove a vehicle that is 
currently being sold in the U.S. market.
    There are other relevant considerations. The number of vehicles at 
issue is small. The total number of vehicles produced under this 
exemption, dating back to the expiration date of the initial exemption, 
is expected to be fewer than 500. Further, Tesla, based on assertions 
made in its submissions in support of its petition for exemption from 
the ESC requirements, expects to produce only 80 additional vehicles 
under this exemption.
    In considering whether to grant a temporary exemption, including a 
renewal of a temporary exemption, we must consider all relevant 
factors. We have discussed earlier in this document the benefits 
provided by advanced air bags. In particular, the requirements for 
advanced air bags were 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. Vehicles without advanced air bags will present greater 
safety risks in these areas.
    After considering all of the relevant information, we have decided 
to extend Tesla's temporary exemption from the advanced air bag 
requirements of FMVSS No. 208 for a period of 40 days after publication 
of this notice in the Federal Register. This is a relatively limited 
time period, but would accommodate the planned end of production of 
Roadster models for the United States market. In determining this date, 
we have taken into consideration submissions by Tesla in support of its 
petition for exemption from the requirements of FMVSS No. 126, 
Electronic Stability Control Systems, regarding its planned end of 
production of the Roadster, as suggested by the Advocates.\10\
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    \10\ With respect to the Advocates' argument that 49 CFR 
555.8(e) is unlawful because it allows the agency to grant an 
exemption for a period longer than three years, we consider the 
argument moot in light of this decision to extend Tesla's exemption.
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    Although Tesla requested an exemption for the Roadster from the 
advanced air bag requirements of FMVSS No. 208 based on substantial 
economic hardship pursuant to 49 U.S.C. 30113(b)(3)(B)(i), the agency 
has also considered whether the Roadster qualifies for an exemption as 
a low-emission vehicle pursuant to 49 U.S.C. 30113(b)(3)(B)(iii). 
Simultaneously with this determination, the agency has made the 
determination to grant a temporary exemption for the Roadster from the 
requirements of FMVSS No. 126 based upon 49 U.S.C. 30113(b)(3)(B)(iii). 
For the reasons explained therein, NHTSA also concludes for purposes of 
this determination that the Roadster is a low-emission vehicle and that 
this temporary exemption of the Roadster from the advanced air bag 
requirements of FMVSS No. 208 would make the development and field 
evaluation of a low-emission vehicle easier.
    We note that, as explained below, prospective purchasers will be 
notified that the vehicle is exempted from the specified advanced air 
bag requirements of FMVSS No. 208. Under Sec.  555.9(b), a manufacturer 
of an exempted passenger car must affix securely to the windshield or 
side window of each exempted vehicle a label containing a statement 
that the vehicle conforms to all applicable FMVSSs in effect on the 
date of manufacture ``except for Standard Nos. [listing the standards 
by number and title for which an exemption has been granted] exempted 
pursuant to NHTSA Exemption No. ------------.'' This label notifies 
prospective purchasers about the exemption and its subject. Under Sec.  
555.9(c), this information must also be included on the vehicle's 
certification label.\11\
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    \11\ Tesla's label would be required to list both its exemption 
from the advanced airbag requirements of FMVSS No. 208 and its 
exemption from the ESC requirements of FMVSS No. 126, which has been 
granted in a separate decision that is published in today's Federal 
Register.
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    The text of Sec.  555.9 does not expressly indicate how the 
required statement on the two labels should read in situations in which 
an exemption covers part, but not all, of a FMVSS. In this case, we 
believe that a statement that the vehicle has been exempted from 
Standard No. 208 generally, without an indication that the exemption is 
limited to the specified advanced air bag provisions, could be 
misleading. A consumer might incorrectly believe that the vehicle has 
been exempted from all of Standard No. 208's requirements. Moreover, we 
believe that the addition of a reference to such provisions by number 
would be of little use to consumers, since they would not know the 
subject of those specific provisions.\12\ For these reasons, we believe 
the two labels should read in relevant part, ``except for the Advanced 
Air Bag Requirements of Standard No. 208, Occupant Crash Protection, 
exempted pursuant to * * *.'' We note that the phrase ``Advanced Air 
Bag Requirements'' is an abbreviated form of the title of S14 of 
Standard No. 208. We believe it is reasonable to interpret Sec.  555.9 
as requiring this language.
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    \12\ We recognize that, in prior grants of exemptions from the 
advanced air bag requirements, the agency has required the 
manufacturer to list the exempted paragraphs by number on the label.
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    In accordance with 49 U.S.C. 30113(b)(3)(B)(i), Tesla is granted a 
renewal of NHTSA Temporary Exemption No. EX 08-01, from S14 (apart from 
section S14.5.1(a)), S15, S17, S19, S21, and S23 of 49 CFR 571.208.\13\ 
The exemption is for the Roadster model and shall remain effective 
until 40 days following publication of notice of this decision in the 
Federal Register, as indicated in the DATES section of this document.

    \13\ We note that, although the agency granted Tesla an 
exemption from paragraph S25 in its January 2008 decision, Tesla did 
not include paragraph S25 in its request for a renewal of its 
exemption.

(49 U.S.C. 30113; delegations of authority at 49 CFR 1.50. and 
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501.8)

    Issued on: September 22, 2011.
David L. Strickland,
Administrator.
[FR Doc. 2011-24897 Filed 9-27-11; 8:45 am]
BILLING CODE 4910-59-P