Tesla's FSD: A Storm of Risks Clouding Autonomy Dominance

The race to autonomous driving has long been Tesla's crown jewel, with CEO Elon Musk promising a "robotaxi network" by 2025 that could redefine transportation. Yet beneath the hype, a growing body of evidence reveals critical flaws in the company's Full Self-Driving (FSD) system—flaws that could upend Tesla's valuation and its ambitions to dominate the autonomous vehicle market. From recurring failures in adverse weather to regulatory scrutiny and mounting safety warnings, Tesla's FSD faces execution risks that investors cannot afford to ignore.

Technological Limitations: A Camera-Only Approach in a Lidar World

Tesla's FSD relies uniquely on cameras and software, eschewing lidar and advanced radar used by rivals like Waymo and Cruise. While this keeps costs low, it creates catastrophic blind spots in adverse conditions.

• Weather-Induced Failures: Heavy rain blurs lane lines, snow obscures road edges, and fog misleads traffic signal recognition. NHTSA investigations into fatal crashes—such as a 2025 incident in foggy conditions—highlight how FSD misinterprets environments, leading to erratic steering or sudden stops.
• Sensor Vulnerabilities: Tests by independent groups, including the Dawn Project, reveal FSD disengages 10 times more frequently than Waymo's lidar-equipped systems in challenging scenarios. A 2025 Santa Barbara test saw FSD fail seven times in 80 minutes, nearly causing collisions.
• Competitor Contrast: Waymo's lidar-based systems outperform FSD in adverse conditions by 40% in urban environments, according to third-party benchmarks.

Tesla's valuation hinges on FSD's reliability, yet its stock has underperformed Alphabet—a company with proven autonomous tech—despite aggressive optimism from Musk.

Regulatory and Safety Headwinds: The NHTSA Probe and Liability Risks

The National Highway Traffic Safety Administration (NHTSA) is deepening its scrutiny of Tesla's FSD, particularly after a 2025 crash in Alabama where the system veered off-road in rain, flipping a driver's car. Key concerns include:
- Lack of Transparency: Unlike Waymo, which publishes peer-reviewed safety reports, Tesla has not shared detailed FSD performance data, eroding trust among regulators and investors. - Liability Exposure: As FSD handles unsupervised driving in Tesla's planned Robotaxi service, the company could face unprecedented legal costs if systems fail in adverse conditions. Analysts estimate liability costs could exceed $1 billion annually if even 1% of FSD-related crashes result in lawsuits.

Market Overvaluation: A Bubble in Disguise?

Tesla's $700 billion valuation assumes FSD's seamless adoption and dominance in autonomous tech. But reality paints a darker picture:
- Consumer Skepticism: A 2025 J.D. Power survey reveals 62% of Tesla owners distrust FSD's performance in bad weather, up from 38% in 2023. - Competitor Gains: Waymo and Cruise, backed by lidar and robust safety data, are securing urban permits faster than Tesla. Waymo's valuation, now at $300 billion, reflects tangible progress absent in Tesla's FSD. - Technical Readiness: Tesla's 2025 Austin Robotaxi rollout faces NHTSA delays due to unresolved weather-related safety concerns.

While Waymo's user base grows steadily, FSD Beta adoption has stagnated at 200,000 users—a fraction of Tesla's 1.8 million eligible vehicles.

The Bottom Line: Caution Is the Only Safe Bet

Tesla's FSD is a work in progress, not a revolution. Its reliance on flawed camera tech, coupled with regulatory pushback and eroding consumer trust, poses existential risks to its valuation. Until Tesla addresses these gaps—perhaps by adopting lidar or sharing rigorous safety data—investors should treat TSLA stock as a high-risk gamble.

For now, the storm clouds over Tesla's autonomy ambitions are too dense to ignore. Prudent investors would do well to wait for clearer skies.