Tesla, the renowned electric-vehicle manufacturer, is once again under scrutiny due to concerns surrounding its driver-assistance features. While these issues may appear significant, they have not impacted the company's stock performance in early trading on Wednesday. Upon closer inspection, the lack of market movement seems justified.
One particularly serious matter drawing attention is a letter sent by the National Highway Traffic Safety Administration (NHTSA) to Tesla in late July. The agency requested detailed information about adjustments made to Tesla's driver-assistance features, specifically those allowing drivers to remove their hands from the steering wheel for prolonged periods.
Tesla has yet to respond to requests for comment, and the NHTSA has stated that it refrains from commenting on open investigations.
It's important to note that most modern vehicles include driver-assistance capabilities, such as speed maintenance, steering assist, and automatic braking. Tesla's vehicles are no exception. However, all these features, Tesla's included, require drivers to remain attentive and engaged at all times. While the primary responsibility lies with the driver, automakers implement systems to ensure compliance. These systems often employ internal cameras, haptic feedback on the steering wheel, or, in some cases, both.
Tesla incorporates both mechanisms; however, Tesla drivers must intermittently apply pressure to the steering wheel; otherwise, the driver-assistance system disengages, returning full control of the vehicle to the driver. The NHTSA's inquiry revolves around an alternative driver-assistance configuration that could circumvent the haptic feedback requirement. Such a modification could potentially lead to driver inattention.
This investigation is not unprecedented, as the NHTSA has been scrutinizing Tesla's driver-assistance features since 2022—a focal point being the analysis of "the technologies and methods employed to monitor, assist, and enforce driver engagement during Autopilot operation."
A Closer Look at Tesla's Driver-Assistance Features
Tesla, the renowned electric vehicle manufacturer, has been making waves in the automotive industry with its driver-assistance features. While the business of automotive safety is undoubtedly serious, Tesla has the flexibility to adjust settings, and in certain circumstances, alterations may be required as mandated by the National Highway Traffic Safety Administration (NHTSA). Despite recent discussions surrounding Tesla's marketing strategy and the NHTSA's investigation in 2022, it is unlikely that these developments will significantly impact the opinions of both Tesla bulls and bears.
News of the NHTSA's letter had an immediate impact on Tesla's stock price, which surged by almost 8% on Tuesday. However, during early trading on Wednesday, shares experienced a slight downturn of 1.8%. On the other hand, both the S&P 500 and Nasdaq Composite saw marginal increases of approximately 0.1%.
While Tesla's stock may be surrendering some of its gains from the previous session, Guggenheim analyst Ronald Jewsikow recently reiterated his Sell rating on Tesla stock, shedding light on certain concerns. He emphasizes that the rising inventories of electric vehicles (EVs) in the United States pose a challenge and suggests that Tesla's stock might be benefiting excessively from artificial intelligence (AI) hype.
EV Sales and Competition
EV sales in the U.S. hit an all-time high in the second quarter, indicating a growing demand for sustainable transportation. However, the supply of EVs is also increasing, which means that competition is getting fiercer, leading to potential price reductions. It's essential to note that part of Tesla's nearly 8% surge in stock price on Tuesday was influenced by reports of the company initiating a new artificial intelligence computing cluster to enhance its driver-assistance software. Surprisingly, a mere technological advancement resulted in a staggering market value increase of $60 billion.
Nonetheless, Ronald Jewsikow's rating and $125 price target remain unchanged. Therefore, it can be inferred that his concerns are already taken into account in Tesla's current stock price.
Despite certain challenges, Tesla investors did receive some positive news. A plan to establish a Tesla charging station combined with a drive-in theater and diner in Los Angeles seems to be underway. It appears that Tesla is now venturing into the movie business, although this expansion is unlikely to have a significant impact on the company's earnings. It is worth mentioning that Tesla already operates the largest network of fast-charging stations in the U.S., demonstrating its commitment to supporting widespread EV adoption.