If you sat down to make a list of Tesla's current challenges, you would be sitting there for a while. However, a bigger problem looms over the horizon as the U.S. Justice Department probes whether Tesla misled investors, consumers, and regulators about its vehicles’ self-driving capabilities. If that results in criminal charges, it could be Tesla's biggest crisis ever.
A new report from Reuters elaborates on the federal investigation underway since 2021, citing three sources who say the probe focuses on whether Tesla committed wire fraud or securities fraud—two federal crimes that could potentially result in criminal charges.
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The names "Autopilot" and "FSD" suggest fully autonomous driving
Tesla is an industry leader in ADAS systems, but maybe it wasn't the best idea to call its Level 2 semi-autonomous driving systems Autopilot and Full Self-Driving and then make it easy to bypass the security systems that ensured drivers were still paying attention to the road.
Tesla also faces a Securities and Exchange Commission investigation over its claims to investors.
Reuters cites three unnamed sources familiar with the investigation who say the probe is focused on Musk's statements, in which the Tesla boss suggested that its cars were capable of fully autonomous driving. It was not revealed which statements, in particular, are being analyzed. Still, there are plenty of examples of him talking about how vital self-driving is for Tesla’s future and how the manufacturer is and wants to remain a leader in the field.
Investigators are also more closely looking at how Tesla represented its Autopilot and Full Self-Driving suites and whether these representations could have given the impression that the systems were more capable than they actually were.
The Justice Department investigation is a serious matter because wire fraud and securities fraud charges have brought down other companies found to have misled investors about what their technology was capable of. One notable example in recent years is Theranos, the Silicon Valley darling startup found to have lied about its blood testing procedures. Its former CEO, Elizabeth Holmes, was convicted of investor fraud and conspiracy and sentenced to prison.
At the same time, it is unclear if anyone at Tesla would face that level of charges, or any at all. "The probe, which is not evidence of wrongdoing, could result in criminal charges, civil sanctions, or no action," Reuters reports. "Prosecutors are far from deciding how to proceed, one of the sources said, in part because they are sifting through voluminous documents Tesla provided in response to subpoenas."
Still, dual Department of Justice and SEC investigations into the very technology that Tesla has staked its future on—Musk recently said the company is "going balls to the wall" for autonomy—are no trifling matters.
In 2016, Tesla published a video showing a Model X that drove without human intervention, which in 2023 was proven to have been staged. The Model X was apparently “not driving itself with technology Tesla had deployed,” according to an older Reuters report that quoted Ashok Elluswamy, director of Autopilot software at Tesla.
In late April of this year, the National Highway Safety Traffic Administration concluded that Tesla’s Level 2 Advanced Driver Assistance System (ADAS), known as Autopilot, was not to blame for the 13 fatal accidents it investigated. It concluded that it was misuse of the system and a “weak driver engagement system was not appropriate for Autopilot’s permissive operating capabilities”—it was too easy to bypass Tesla’s safety systems designed to prevent misuse.
Investigations into Autopilot and FSD are ongoing, and it’s unclear when they will conclude.
Things have been a bit strange at Tesla recently. The automaker has fired about 10% of its global workforce, including the entire department behind its expansive Supercharger network, which is bigger and better than any other charging network currently available. Elon Musk says he wanted to make an example out of this round of mass layoffs to show how committed he was to streamlining the company’s business and cutting costs to remain competitive in the face of a sales slowdown and increased competition from other automakers, especially in China.
