Could This One Thing Derail Tesla?

| About: Tesla, Inc. (TSLA)
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The health and safety measures mandated during the past several decades have probably saved many thousands of lives. You know, such things as requiring that all cars be equipped with seat belts, collapsible steering wheels, pollution control devices, air bags, and more recently, anti-lock brakes. But we aren't alone - some areas in Europe have even required that the fronts of cars be high enough, and not sharp, so that if a car hits a pedestrian it won't hurt him, or worse, cut him in half; thus some of the ugly looking cars with high squarish front ends. In fact, Google and many other companies are even trying to keep us really safe by developing a self-driving car so we won't have to learn how to drive at all.

Well, more recently Congress has passed a new safety regulation which may have far-reaching consequences for the entire electric and hybrid automobile industry. This new safety measure is not for the occupants of the car, but instead, is supposed to protect those innocent pedestrians and bicyclists who wouldn't be able to hear these cars. As I see it, this new regulation has the potential of causing all sorts of chaos with electric vehicle manufacturers, and specifically to Tesla, which at present is the spearhead for quality high-end electric cars in the world. Even General Motors, Ford, Toyota and Volkswagen, along with several other companies and organizations, are fighting it by trying to alter or delay its implementation. Most of the estimates of the lives that would be saved by this regulation are simply conjecture, as there is no hard evidence to back up any of the claims.

So, what exactly is this new regulation? It is that all electric vehicles such as the Tesla Model S, and hybrids like the Prius, the Ford C-Max (and even electric motorcycles) would need to come equipped with a "noisemaker" that would be loud enough to be heard by someone, say, who is riding a bicycle or walking in a shopping center, since these cars are now so quiet, they say, that someone might be run over because they can't hear it coming. The "noise" would be generated at all speeds below 18 mph - as long as the car is engaged in drive or reverse. regardless of whether it is moving or not - as the provision is presently written.

The relevant part of the actual provision is stated below, which comes directly from The Federal Register, The Daily Journal of the United States Government - Federal Motor Vehicle Safety Standards; Minimum Sound Requirements for Hybrid and Electric Vehicles (FMVSS No. 141):

The proposed standard establishes minimum sound requirements for hybrid and electric vehicles when operating under 30 kilometers per hour (km/h) (18 mph), when the vehicle's starting system is activated but the vehicle is stationary, and when the vehicle is operating in reverse.

The final rule issuing the final standard will come on January 4, 2014; at that time we will know exactly when and to what degree all of the standards are to be implemented. As it stands now there will be a three year phase-in of the standards, starting in 2015; each year increasing … 30% compliance the first year, 60% the second year, 90% the third year, and 100% "three years after the date that the final rule is issued." September 1st is the date each of these of these phase-ins. In other words, it will take some time for these standards to be fully implemented; at least four years from now.

The initial plan was to require that by 2014 everything would be finalized for the implementation of the "noisemakers", however, as I am writing this article, there has been a great deal of resistance by the major car manufacturers. And why is this? Imagine, if you will, that you are trying to sell an electric car or hybrid … what is one of its best selling-points? It is quiet and it moves effortlessly without rattling the nerves from all the roar and whine of a normal gasoline car, especially as it starts and stops. Imagine also, that you live in California or other high density areas where many times you may find yourself sitting hour after hour in traffic jams. In a quiet electric car, it would be peaceful without all the sounds of starting and stopping. Even with many electric vehicles on the road it would still be silent and easy on the nerves … nice, unless that noisemaker were required, in which case it would turn this quiet scene into a real nightmare, with the many cars sounding more like an enormous swarm of angry bees, buzzing with a collective intensity which could be heard from miles away. And if you are sitting in one of these cars, your nerves would certainly become more than a little frazzled by the noise. Who would want to buy a car like that? What good is it to have a car that is so noisy that you can't even come home at night without announcing to all the neighbors that you have arrived? This scenario may be a bit of an exaggeration, but I think that you can get the idea.

At the very least electric car sales - which are only now beginning to gain momentum - would be terribly hurt, or even crippled, by this ridiculous and capricious regulation. Tesla has made great strides in the sales of its new Model S precisely because it is such a beautifully constructed state-of-the-art and quiet car, which beats nearly every other car on the market in its quality. Now this! What could happen to Tesla's sales if this new regulation would become the law of the land? Let's hope that it does not.

While they are at it, maybe Congress should also require that all cars have strobe lights to alert all the deaf people who can't hear the noisemakers … wouldn't you think that they need to be protected too, since they can't hear the roar of gasoline cars! I know that this is a ludicrous statement, but to have such a regulation would be just about as ridiculous as having noisemakers on all electric or hybrid cars.

We need to think long and hard about what we are doing to ourselves with some of these new regulations … we don't need another regulation to protect us from ourselves - what we need is to be more aware of our own responsibility to be conscious of our own surroundings as we live in this world.

So, what will happen to Tesla, which is only in the fledgling stages of trying to build its equity and financial stability? If the major car manufactures, along with Tesla, are successful, at the very least in having its implementation delayed for several more years, then it may have less harmful effect … but if it is forced on the manufacturers too soon, then it could have a very negative influence, possibly even placing Tesla's very survival in jeopardy. Certainly it would lower my expectation of how well Tesla would perform; its price could plummet with buyers not wanting to buy such a noisy car, at least for a while. Right now, I am figuratively holding my breath, waiting to see what happens.

The comment period is over, as of March 15, 2013 - now all we can do is wait and see what the NHTSA decides to do. For more information on what is about to happen, you might want to refer to the following articles:

Automakers Complain EV "Noisemakers" for the Blind Are Too Loud, by Shane McGlaun.

Nissan, Mitsubishi tell NHSA requiring electric vehicles to make noise will turn buyers away, by Danny King.

Note: I own a Model S myself, and thoroughly enjoy its quietness, and the peace of mind that it gives me.

Disclosure: I am long TSLA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.