Tesla CEO is frustrated by recall on Model S car chargers

Bloomberg NewsJanuary 17, 2014 

— Elon Musk, the billionaire CEO and co-founder of electric carmaker Tesla Motors, is sniping over semantics with the industry’s regulator, the latest step in what he calls a crusade to revolutionize the automobile.

The flap began late last year as the National Highway Traffic Safety Administration started investigating battery fires in the $70,000-and-up Tesla Model S sedan. It escalated after the agency listed as a recall Tesla’s steps to reduce fire risks during recharging. An exasperated Musk took to Twitter on Jan. 14, saying “the word ‘recall’ needs to be recalled.”

As Musk looks to start selling into the safety-conscious mass market within three years, he wants to dispel any notion that owning a Tesla is inherently dangerous. Yet by sparring publicly with NHTSA, he risks rankling a regulator that could force costly alterations or fine Tesla millions of dollars for not reporting what the administration considers safety defects.

“This is just the kind of reaction you get from someone who is essentially a rookie in the car business,” said Jack Nerad, a senior analyst with Kelley Blue Book. “You will not hear a seasoned auto executive knock NHTSA.”

Automakers typically work behind the scenes to negotiate with NHTSA on the scope and timing of recalls. For the largest automakers, these efforts can result in recalls covering fewer model years or applying only to vehicles made in certain factories to narrow the cost to companies.

“Because Tesla gets so much attention, NHTSA rides us pretty hard,” Musk said in a telephone interview. “People are going to think our car has a greater propensity for fire than a gasoline car, which is simply untrue.

“We’ve now almost 30,000 Tesla vehicles on the road. Fire incidents are 1 in 10,000. For gasoline cars, it’s 1 in 1,300. That doesn’t make any sense to us,” he said. “We should be applauded for how amazing our car is for never catching on fire, relative to a gasoline car.”

Latest regulatory challenge

Tesla shares have rallied almost 43 percent since a low of $120.50, much of it after the company said Jan. 14 that fourth-quarter sales exceeded targets. But they’re down about 10 percent from a record in September, with some of the biggest tumbles occurring after safety-related news.

Tesla’s latest regulatory challenge dates to November, when a fire broke out while a Model S was recharging in an Irvine, Calif., garage. The company concluded the fire was caused by the house’s wiring. Orange County fire officials said it could have been the house or the car’s charging cable.

Tesla issued an over-the-air software update that enables a charging Model S to reduce amperage if overheating is detected.

The plug adapter replacement showed up as a recall notice on NHTSA’s website Jan. 13. That, along with media reports about it, led to Musk’s swipe on Twitter. Company officials said it wasn’t a true recall because customers could swap the parts themselves without taking their cars to a service center.

NHTSA Deputy Administrator David Friedman downplayed any tensions with Tesla during an interview at the North American International Auto Show in Detroit on Jan. 14. The company is doing a good job of communicating with and responding to the agency, he said.

“The other dynamics aren’t important,” Friedman said.

The agency began investigating the Model S on Nov. 19 after two U.S. fires that started after drivers ran over road debris that punctured the cars’ lithium-ion battery packs. Investigators sent a set of detailed questions that the company answered within a week, Musk said Jan. 10.

“We’re really quite keen to have NHTSA close the investigation or ask us for more information so we can provide it,” Musk said. “We would really, really like to get this done.”

NHTSA’s duel role

Tesla is replacing the plug adapters even though it’s a “slight(ly) gray area” what is responsible for overheating where the plug meets the wall socket, he said.

Musk said the company shouldn’t need to report a safety issue that isn’t under NHTSA’s responsibility. It would be a bit silly to report to the car-safety regulator that somebody’s house had inadequate or faulty wiring, he said.

“What are they supposed to do about that, issue a recall for the house?” Musk said.

Friedman, in his interview, said NHTSA has a dual role of enforcing auto safety and promoting improvements in fuel efficiency. That makes it doubly important to determine whether there’s a defect with the Model S, he said.

“We’re taking this issue seriously,” said Friedman, who will be the agency’s acting chief when Administrator David Strickland departs this month for a job with the Venable law firm. “People aren’t used to the new challenges that electric vehicles pose.”

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