Tesla shares fall again on reports of Musk-FSD investigation

Tesla shares fell 2.8% on Tuesday

S&P 500

And

Nasdaq Composite

Futures fell 0.4% and 0.6%, respectively.

The investigation boils down to whether Tesla’s claims about its driver assistance systems are fraudulently misleading customers.

Tesla’s driver assistance systems, called AutoPilot and Full Self Driving, require 100% driver supervision. Tesla documentation and vehicle alerts remind drivers to pay attention. However, the Justice Department is reviewing statements from Musk and the company that suggest the cars can actually drive themselves, which the report says creates unreasonable expectations among drivers.

Investors receive an endless stream of news about Tesla’s driver assistance systems. First of all, Musk often says that developing truly self-driving cars will be a financial boon for Tesla.

Tesla also has the largest fleet of connected vehicles on U.S. roads, meaning that if the system is changed at the behest of regulators, the number of vehicles involved is enormous. Tesla recalled around 2 million vehicles in December 2023 to update safety warnings. This recall was the result of an investigation by the National Highway Traffic Safety Administration to prevent drivers from abusing the system. The recall solution was delivered to virtually every Tesla on the road via an over-the-air software update.

NHTSA also requires every automaker to report every accident involving an ADAS system. Tesla reports most frequently because it is the only automaker that has all the data on when driver assistance systems are activated.

Investigations and oversight will only increase as cars become smarter. Investors will simply have to get used to this reality.

Wednesday’s decline follows a weak Tuesday, when Tesla shares fell as investors digested other news. Shares fell 3.8% to close at $177.81 on Tuesday.

Driver assistance systems were also in use in stores on Tuesday. NHTSA sent a letter to Tesla requesting details about 20 vehicles involved in crashes that had driver assistance features enabled. Investors knew about the NHTSA investigation. According to the new information, the number was 20 accidents.

April sales figures reported by the China Passenger Car Association were also released on Tuesday. Tesla sales at its Shanghai factory totaled 62,167 vehicles, down about 30% from the 89,064 vehicles sold in March and down about 18% year over year.

Finally,

Clear results may have influenced investor sentiment. The EV startup announced its first quarter results on Monday evening. Sales were $173 million. However, about $51 million came from the Saudi government, which owns the majority of Lucid shares. Excluding related party transactions, Lucid’s revenue fell nearly 20% year-over-year. Lucid shares closed down 14.1% on Tuesday.

Sales growth has been a struggle for all U.S. electric vehicle manufacturers in 2024. Cox Automotive said battery-electric vehicle sales rose 3% year-over-year in the first quarter.

Tuesday’s decline still leaves Tesla shares 25% above their 52-week closing low hit on April 22, hit shortly before Tesla reported better-than-feared first-quarter earnings. At the start of trading on Wednesday, Tesla shares were down 28% this year.

Write to Al Root at [email protected]