Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changes, but are not fully autonomous
US prosecutors are investigating whether Tesla committed securities or wire fraud by potentially misleading investors and consumers regarding the capabilities of its electric vehicles' self-driving features.
While Tesla's Autopilot and Full Self-Driving systems offer assistance with steering, braking, and lane changes, they are not fully autonomous. Despite Tesla's warnings for drivers to remain prepared to take over control, the Justice Department is scrutinising other statements made by Tesla and CEO Elon Musk implying that their cars are capable of autonomous driving.
In a separate investigation, US regulators have examined numerous crashes, including fatal accidents, involving Teslas with Autopilot engaged, leading to a widespread recall by the automaker.
Reuters first reported the US criminal investigation into Tesla in October 2022 and is now the first to disclose the specific criminal liabilities that federal prosecutors are exploring.
Investigators are examining whether Tesla engaged in wire fraud, which involves deceptive practices in interstate communications, by potentially misleading consumers regarding its driver-assistance systems, according to the sources. Additionally, they are investigating whether Tesla committed securities fraud by possibly deceiving investors, two of the sources mentioned.
One of the individuals stated that the Securities and Exchange Commission (SEC) is also looking into Tesla's representations about driver-assistance systems to investors. The SEC declined to comment on the matter.
Autopilot and Full Self-Driving
Tesla did not respond to requests for comment. In October, it revealed in a filing that the Justice Department had requested information from the company regarding Autopilot and Full Self-Driving.
It's important to note that the investigation, while ongoing, does not imply any wrongdoing on Tesla's part and could lead to criminal charges, civil penalties, or no action at all. According to one of the sources, prosecutors are still far from making a decision on how to proceed, partly due to the extensive documentation provided by Tesla in response to subpoenas.
Reuters was unable to ascertain the specific statements that prosecutors are reviewing as potentially illegal. Elon Musk has vigorously promoted the capabilities of Tesla's driver-assistance technology for nearly a decade.
Tesla's archived videos demonstrating the technology on its website state, "The person in the driver’s seat is only there for legal reasons. He is not doing anything. The car is driving itself."
In a lawsuit over a fatal crash involving Autopilot, a Tesla engineer testified in 2022 that one of the videos, posted in October 2016, aimed to showcase the technology's potential but did not accurately represent its capabilities at the time. Nonetheless, Musk shared the video on social media, stating,
“Tesla drives itself (no human input at all) thru urban streets to highway streets, then finds a parking spot.”
During a conference call with reporters in 2016, Musk described Autopilot as "probably better" than a human driver. In an October 2022 call, Musk discussed an upcoming Full Self-Driving (FSD) upgrade, claiming it would enable customers to travel "to your work, your friend’s house, to the grocery store without you touching the wheel."
As Tesla's car sales and profits decline, Musk is increasingly focusing on self-driving technology. Tesla recently reduced costs through mass layoffs and scrapped plans for a highly anticipated $25,000 model expected to drive sales growth.
In mid-April, the billionaire executive posted on his social media platform X, "Going balls to the wall for autonomy is a blindingly obvious move." Tesla shares, down more than 29 per cent so far this year, surged in late April when Musk visited China and made progress toward approvals to sell FSD there.
Musk has repeatedly promised self-driving Teslas for about a decade. Tesla lawyers stated in a 2022 court filing that "Mere failure to realize a long-term, aspirational goal is not fraud."
Legal Challenges
Prosecutors examining Tesla's claims regarding autonomous cars are proceeding cautiously, recognising the legal obstacles they face, according to sources familiar with the inquiry.
They will need to demonstrate that Tesla's claims crossed the line from legitimate salesmanship to material and knowingly false statements that unlawfully harmed consumers or investors, according to three legal experts not involved in the investigation.
US courts have previously ruled that optimistic corporate statements regarding product claims do not necessarily constitute fraud. In 2008, a federal appeals court ruled that expressions of corporate optimism alone do not prove that a company official intentionally misled investors.
Justice Department officials are likely to seek internal Tesla communications as evidence that Musk or others knew they were making false statements, said Daniel Richman, a professor at Columbia Law School and former federal prosecutor.
Richman noted that while this presents a challenge, the safety risk associated with overselling self-driving systems also underscores the seriousness with which prosecutors, a judge, and jury would regard the statements.
Fatal Crashes
Tesla's claims about Autopilot and FSD have also come under scrutiny in regulatory investigations and lawsuits.
Regulators and courts have expressed concerns in recent months that corporate messaging about the technology, including the brand names Autopilot and Full Self-Driving, have given customers a false sense of security.
In April, the Washington State Patrol arrested a man on suspicion of vehicular homicide after his Tesla, with Autopilot engaged, struck and killed a motorcyclist while the driver was looking at his phone, according to police records. A trooper, in a probable-cause statement, cited the driver's "admitted inattention to driving, while on autopilot mode ... putting trust in the machine to drive for him."
In Washington state, drivers are "responsible for the safe and legal operation of that vehicle" regardless of its technological capabilities, a state patrol spokesperson informed Reuters.
During the same month, the US National Highway Traffic Safety Administration (NHTSA) initiated an investigation to determine if Tesla's recall of over Two million vehicles in December adequately addressed safety concerns with Autopilot.
Following the publication of this story, US Senator Edward Markey, a Massachusetts Democrat and long-standing critic of the company's driver-assistance systems, stated in a message posted on X that he was "glad to see" NHTSA and Justice Department officials taking action against Tesla over these safety concerns.
The recall followed a lengthy investigation by regulators after incidents where cars with Autopilot engaged collided with vehicles at emergency scenes. Regulators subsequently examined hundreds of crashes involving Autopilot and identified 14 deaths and 54 injuries.
Tesla disputed NHTSA's findings but agreed to the recall, which involved over-the-air software updates designed to alert inattentive drivers.
According to agency records, the NHTSA investigation found "a critical safety gap between drivers’ expectations" of Tesla’s technology "and the system’s true capabilities." This gap led to foreseeable misuse and avoidable crashes.
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