Tesla Probe: U.S. Eyes Fraud, Stock Drops 3.8% Amid Scrutiny

Key Takeaway

• U.S. prosecutors investigate Tesla for potential securities, wire fraud over Autopilot and FSD systems' capabilities, raising legal challenges.
• NHTSA probes into Autopilot's safety after crashes; Tesla faces a July 1 deadline to submit data or risk $135+ million fines.
• Tesla's stock drops 3.8% to $177.81, marking a 28% decrease in 2024 amidst regulatory scrutiny and internal reorganization efforts.

Regulatory and Legal Focus on Tesla

U.S. prosecutors are investigating Tesla Inc. for potential securities or wire fraud related to its electric vehicles' self-driving capabilities. This scrutiny stems from concerns that Tesla, and its CEO Elon Musk, may have misled investors and consumers about the autonomy of its Autopilot and Full Self-Driving (FSD) systems. Despite Tesla's advisories for drivers to remain engaged, the Justice Department is probing statements suggesting the cars can fully drive themselves. This investigation, initially reported by Reuters in October 2022, marks a significant legal challenge for Tesla, emphasizing the gap between promotional assertions and the current technological capabilities of its driver-assistance systems.

Autopilot's Safety and Performance in Question

The National Highway Traffic Safety Administration (NHTSA) has been actively investigating Tesla's Autopilot following numerous crashes, some fatal, involving the technology. A mass recall was initiated by Tesla to address these concerns. Despite Tesla's claims of advanced autonomy, internal and external assessments reveal discrepancies in the system's performance. For instance, a Tesla engineer acknowledged in a lawsuit that a promotional video from October 2016 did not accurately represent the technology's capabilities at the time. Musk's ambitious claims about Autopilot and FSD, including the ability for Teslas to drive without human input, are under scrutiny for potentially misleading consumers and investors about the systems' true functionality and safety.

Financial Implications Amidst Scrutiny

Tesla faces a July 1 deadline to submit detailed Autopilot data to NHTSA or risk fines exceeding $135 million. This comes as Tesla's stock performance wanes, with a notable drop of 3.8% to $177.81 and an overall decrease of 28% in 2024. The legal inquiries by the DOJ and SEC, alongside regulatory probes into Autopilot's role in collisions, underscore the mounting pressures on Tesla. The company's reorganization efforts, including layoffs affecting its Autopilot and vehicle safety engineering teams, reflect the challenges Tesla faces in balancing innovation with regulatory compliance and market expectations.