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He also said "as clean as a hospital's operating room". I'd probably rather breath smog than a hospital's indoor air but both make a lot of people sick. The operating rooms have different air treatments than the rest of the hospital.
I would say innuendo construed by most. It seemed very apparent to me (at least) that he was making reference to VW without mentioning them by name. I think almost everyone in the crowd got the "joke".
...The Model X also has a large HEPA air filter system. Musk joked about Volkswagen's recent emissions scandal: "The third thing, which is actually sort of topical," he said to laughter, "we designed [this filter] well before recent events."...
Regardless it's a joke a or, VW is a disgrace company. Driving behind a TDI is like driving up to 40 cars that emitted nitrogen oxide allowed in US. I hope VW get the hardest punishment.
On positive side, this scandal will toughen car emission test on all auto manufactures. In the long run it benefits consumers.