Tesla Faces Regulatory Crossroads as FSD Safety Concerns Intensify

Tesla's rapidly expanding deployment of its Full Self-Driving (FSD) beta software has triggered significant regulatory pushback, directly threatening its operational momentum. according to CBS News. . , reportedly involving an autonomous FSD vehicle, proved a major catalyst, intensifying scrutiny over Tesla's safety protocols and delayed crash reporting practices. Compounding these challenges, California has enacted a new law imposing direct liability on autonomous vehicle companies for traffic violations committed by their systems, creating substantial legal and operational uncertainty for Tesla's FSD rollout strategy. Furthermore, Tesla faces ongoing, separate investigations into its "summon" feature, which allows vehicles to move autonomously at very low speeds in parking situations. These mounting regulatory actions and the associated compliance burdens now pose a tangible risk to Tesla's FSD deployment schedule and its broader deployment ambitions.

FSD Safety Performance Falls Short of Autonomy Claims

Tesla's latest Full Self-Driving software still lags far behind its own ambitious claims of autonomy, recent safety incidents and regulatory scrutiny reveal. , despite significant incremental improvements over prior versions.

U.S. , . , raising serious concerns about the system's reliability in everyday scenarios. , , further underscore these limitations, particularly in challenging environmental circumstances.

Tesla's own software remains strictly a Level 2 driver-assistance system, requiring continuous human supervision and intervention despite its advanced features. Industry experts point to persistent mapping inaccuracies and situational hesitancy as critical technical barriers, noting the system often struggles to interpret complex intersections or unexpected obstacles. , a regulatory hurdle that remains unaddressed.

While Tesla pushes forward with self-certification efforts in Nevada, its progress in autonomous driving lags behind rivals like Waymo, which has demonstrated advanced Level 4 capabilities in real-world robotaxi operations. Waymo's system, tested extensively in diverse urban environments, consistently outperforms Tesla's in handling edge cases and maintaining safety without human intervention, positioning it ahead in the race toward commercial autonomous deployment.

For investors, these gaps between FSD's marketing and actual performance present tangible risks-regulatory penalties, reputational damage, and delayed commercialization-while competitors like Waymo steadily capture autonomous mobility leadership.

Governance and Compensation Controversy Worsens Risks

The governance debate around Tesla intensified this quarter, shifting focus from technical performance to executive compensation structures and board oversight. , a prominent Tesla bull turned critic, publicly attacked the $1 trillion compensation package awarded to Elon Musk. according to India Times. Gerber argued the board, led by chair , failed in its core duty to represent shareholder interests, instead blessing a pay package seen by some as excessively ambitious and potentially disconnected from realistic outcomes. This criticism points to deeper tensions within the boardroom regarding its effectiveness and independence.

Compounding these governance concerns, Gerber escalated safety criticisms against Tesla's FSD system in September 2024. He explicitly stated the technology lacks the necessary safety foundation to be classified as true self-driving, raising serious doubts about its readiness and regulatory compliance amidst ongoing safety standard debates. This external scrutiny intersects critically with the compensation plan. The $1 trillion payout hinges entirely on the successful commercialization of FSD and robotaxis – ventures now facing heightened regulatory and public trust challenges. California's strict liability laws, referenced in the previous section on autonomous vehicle liability, become a major looming risk should FSD-related incidents occur. The combination of board governance questions and mounting safety/regulatory hurdles over FSD creates a more complex and potentially damaging risk profile for Tesla shareholders than previously apparent, casting doubt on the achievability of the compensation targets and the board's judgment in setting them.

Regulatory Roadblocks and Investor Realities

Tesla's ambitious self-driving goals now confront serious regulatory headwinds. according to CBS News, . .

The pressure to hit FSD targets compounds these risks. according to India Times, creating incentive conflicts as safety concerns mount. according to ITI, highlighting how regulatory skepticism could undermine public trust and delay adoption timelines.

For investors, these regulatory challenges create a dual-risk scenario. If Tesla faces major fines or forced recalls, quarterly results could deteriorate rapidly. Conversely, . While the long-term promise of autonomous transportation remains substantial, .