U.S. launches probe into nearly 2.9 million Tesla cars over crashes linked to self-driving system

The National Highway Traffic Safety Administration (NHTSA) has launched a new investigation into nearly 2.9 million Tesla vehicles equipped with its Full Self-Driving (FSD) system, citing reports of traffic violations, crashes, and injuries linked to the technology. This probe intensifies existing regulatory scrutiny over Tesla's automated driving features, including prior investigations into its 'summon' function and crash reporting practices, raising significant questions about the widespread safety and reliability of FSD. The news contributed to a 1.4% decline in Tesla shares, adding pressure on CEO Elon Musk to demonstrate the system's efficacy amidst ambitious deployment goals for self-driving cars and robotaxis.

Analysis

The National Highway Traffic Safety Administration (NHTSA) has initiated a new investigation into approximately 2.9 million Tesla vehicles equipped with its Full Self-Driving (FSD) system, encompassing both "Supervised" and "Beta" versions. This probe follows 58 reported safety violations, including over a dozen crashes, fires, and 23 injuries, stemming from incidents like red light infractions and lane changes into oncoming traffic. This significantly expands regulatory scrutiny beyond previous investigations into Tesla's automated driving features.

This latest inquiry intensifies existing regulatory pressure, building on over three years of NHTSA investigations into Tesla's automated driving systems, which include probes into its "summon" feature and alleged delayed crash reporting. The agency's concern centers on the requirement for a "fully attentive driver," despite FSD's capabilities, raising fundamental questions about the software's safety and widespread operational viability. Morningstar analyst Seth Goldstein, holding a "sell" rating on Tesla, explicitly questioned the software's functionality.

The news prompted a 1.4% decline in Tesla shares on Thursday, reflecting investor apprehension regarding the escalating regulatory challenges. CEO Elon Musk faces increased pressure to demonstrate the efficacy and safety of FSD, particularly as he targets deploying hundreds of thousands of self-driving Teslas and robotaxis by the end of next year. The investigation could significantly impact Tesla's timeline and public acceptance for its advanced driver-assistance systems.

Key Decisions for Investors

• Investors should closely monitor the NHTSA investigation's progress and potential outcomes, as regulatory actions could lead to recalls or operational restrictions for Tesla's FSD system.
• Re-evaluate the revenue and profitability projections tied to Tesla's FSD and robotaxi ambitions, considering increased regulatory hurdles and potential delays in widespread deployment.
• Assess the potential for increased legal and reputational risks to impact Tesla's brand perception and long-term market share in the autonomous driving sector.