The Tesla brand is a powerful force. Without even a glimpse at the vehicle, almost half a million people have already put down a $1,000 deposit on the auto manufacturer’s Model 3—not even yet in production, and not slated for consumer roll-out until the end of 2017 at the earliest.
Elon Musk, Tesla’s CEO and personality with a cult tech following of his own, fuels the mystique of the company he helms, often making big promises his critics doubt he’ll deliver.
Recently, however, Tesla’s name has been associated with both a fatal tragedy and an alleged attempt to cover up vehicle malfunction. Any negative publicity could have a big impact on Tesla’s sales and its stature as a main player the autonomous vehicle race. So what’s really going on with Tesla, and how are they responding to the muck?
Tesla has taken steps (of varying alleged magnitude) to keep problems with its cars out of the press. Now, the government’s vehicle safety arm—the National Highway Traffic Safety Administration (NHTSA)—is taking seriously claims that instead of publicizing vehicle defects, Tesla is actively hiding them, forcing owners to sign confidentiality agreements before performing necessary repairs, The New York Times reports.
Several Model S owners claimed mechanics told them the ball joint bolt (a component of the suspension) was unusually loose, causing wear, and owners also reported unusual amounts of rust. One owner in particular claimed that Tesla turned down his request for repair because the car was out of warranty, but then the company later offered to cover half of the repair costs if the owner would sign a “Goodwill Agreement,” the details of which look very much like a non-disclosure agreement (NDA). As reported June 10 by the automotive blog Daily Kanban, “Tesla appears to demand an NDA from owners in exchange for satisfaction regarding its vehicle defects.”
While NDAs are common in the tech world, they’re practically unheard of in the auto industry, and in fact the NHTSA released their own statement: “NHTSA learned of Tesla’s troublesome nondisclosure agreement [in May]. The agency immediately informed Tesla that any language implying that consumers should not contact the agency regarding safety concerns is unacceptable, and NHTSA expects Tesla to eliminate any such language.”
For their part, Tesla initially shot back, stating, “Tesla has never and would never ask a customer to sign a document to prevent them from talking to NHTSA or any other government agency. That is preposterous.” Tesla also insisted there is no suspension issue with the Model S, a claim which the NHTSA later backed up.
Tesla later revised its Goodwill agreement to make it clear customers were not prohibited from reporting safety concerns to regulators. The NHTSA stated that they are now satisfied with Tesla’s Goodwill agreement.
So, it seems that while Tesla didn’t explicitly forbid customers from reporting safety concerns, and they didn’t technically require customers to sign an NDA, they did, with their Goodwill agreement, ask for customer confidentiality about vehicle problems and repairs.
We spoke with Alan, a New Jersey resident who has owned a Model S for more than two years. His experience is personal, of course, but he said he’s had a few problems with his car over the years (though not suspension problems), and each time Tesla has called him, often before he even knew there was an issue that needed fixing. Each time, Tesla paid for repairs and never once required Alan sign a confidentiality agreement of any kind.
Do NDAs have a Role in Vehicle Ownership?
According to the NHTSA, no. NDAs (by any name) that either implicitly or explicitly encourage people to keep vehicle safety concerns to themselves are illegal and dangerous. Vehicle problems—especially ones that could be found across the board—must be reported so the issue can be resolved.
Craig McClellan, a lemon law lawyer in California, told the Daily Kanban that California (Tesla’s home state) has a law making “any confidentiality clause, gag clause, or similar clause … null and void as against the public policy of this state.” Laws vary by state, but McLellan recommended ignoring NDAs issued by automakers, saying legally, customers are always entitled to talk to the NHTSA. Many customers, says McLellan, are scared when faced with such paperwork and don’t know their rights.
Will Confidentiality Clauses Ever Be Legal?
We had a glimpse of the future of recalls and repairs this past fall with Tesla (being at the front of the pack comes with its downsides, too). As we previously reported, this spring Tesla updated an autonomous driving feature that proved too dangerous for drivers—all via the cloud.
As vehicles become more and more connected, we will likely see automakers responding to safety issues with cloud updates rather than in-person vehicle recalls. It’s likely word will still get out as keeping a secret becomes difficult when thousands of customers are affected (as with the Tesla updates in March). However, instances like these make it clear that government agencies must continue to find ways to be involved with recall-level vehicle safety repairs to keep any potential problems public knowledge and not shrouded in mystery.
Tesla’s First Autonomous Tech-Related Fatality
Shortly after the early-June kerfuffle with Goodwill agreements, the first known fatality in an autonomous car was reported. A Florida resident driving a Model S Tesla was using the autopilot feature (which is not a driverless feature; drivers must stay engaged with the road and car, says Tesla) and reportedly watching a Harry Potter DVD. Neither the car nor the driver noticed a tractor trailer crossing the road ahead and the car slipped under the truck, killing the occupant of the Tesla. The brakes were never applied.
Tesla has made it clear that the autopilot feature is still in a beta phase, and every time it’s engaged, the car reminds the driver: “Always keep your hands on the wheel. Be prepared to take over at any time.” See Tesla’s full statement here.
However, the automaker still put the technology into the hands of the public, which they can’t control, a move other companies (like Google) have avoided. Insiders now believe the fatality might delay the introduction of driverless vehicles on a whole.
For Tesla — and others driving autonomous vehicle technology — any challenge to their commitment to safety and transparency could mean a threat to their entire brand (and sales, stock price, etc.). No doubt Tesla has sufficient momentum to weather a few storms, but public scrutiny is not likely to leave the Tesla brand be anytime soon.