U.S. prosecutors are examining whether Tesla committed securities or wire fraud by misleading investors and consumers about the self-driving capabilities of its electric vehicles, three people familiar with the matter said Reuters.
Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changing – but are not completely autonomous. While Tesla has warned drivers to remain prepared to take over driving, the Justice Department is examining other statements from Tesla and CEO Elon Musk that its cars can drive themselves.
U.S. regulators have separately investigated hundreds of accidents, including fatal ones, involving Teslas with Autopilot on, leading to a mass recall by the automaker.
Reuters reported exclusively on the US criminal investigations against Tesla in October 2022 and is now the first to report on the specific criminal liability that the Federal Prosecutor’s Office is examining.
Investigators are looking into whether Tesla committed wire fraud, which is deception in interstate communications, by misleading consumers about its driver assistance systems, the sources said. They are also looking into whether Tesla committed securities fraud by deceiving investors, two of the sources said.
The Securities and Exchange Commission is also investigating Tesla’s claims about driver assistance systems to investors, one of the people said. The SEC declined to comment.
Tesla did not respond to a request for comment. Last October, it disclosed in a filing that the Justice Department had asked the company for information about Autopilot and Full Self-Driving.
The Justice Department declined to comment.
The investigation that does not provide evidence of wrongdoing could result in criminal charges, civil penalties, or failure to take action. One of the sources said prosecutors are far from deciding how to proceed, in part because they are combing through extensive documents that Tesla submitted in response to subpoenas.
Reuters could not determine which specific statements prosecutors consider potentially unlawful. Musk has aggressively promoted the power of Tesla’s driver assistance technology for nearly a decade.
Videos demonstrating the technology, still archived on Tesla’s website, state: “The person in the driver’s seat is only there for legal reasons.” He does nothing. The car drives itself.”
A Tesla engineer testified in a 2022 lawsuit over a fatal Autopilot accident that one of the videos released in October 2016 sought to show the technology’s potential and did not accurately represent its capabilities at the time. Nevertheless, Musk posted the video on social media and wrote: “Tesla drives itself (without any human intervention) through city streets to highway streets and then finds a parking space.”
In a conference call with reporters in 2016, Musk described Autopilot as “probably better” than a human driver. During a call in October 2022, Musk discussed an upcoming FSD upgrade that would allow customers to “drive to your work, to your friend’s house, to the grocery store without having to touch the steering wheel.”
Musk is increasingly focused on self-driving technology as Tesla’s car sales and profits slump. Tesla recently cut costs through mass layoffs and shelved plans for a long-awaited $25,000 model that was expected to spur sales growth.
“Going all out for autonomy is a completely obvious move,” the billionaire executive posted on his social media platform X in mid-April. Tesla shares, which have fallen more than 28% so far this year, rose at the end April surged as Musk visited China and made progress in getting approval for FSD sales there.
Musk has been promising self-driving Teslas for about a decade. “Simply failing to achieve a long-term, ambitious goal is not fraud,” Tesla lawyers said in a 2022 court filing.
LEGAL CHALLENGES
Prosecutors probing Tesla’s claims about autonomous vehicles are proceeding with caution and are aware of the legal hurdles they face, people familiar with the investigation said.
They must prove that Tesla’s claims crossed the line between legal salesmanship and material and knowingly false statements that unlawfully harmed consumers or investors, said three legal experts not involved in the investigation Reuters.
U.S. courts have previously ruled that “puffing” or “corporate optimism” regarding product claims do not constitute fraud. In 2008, a federal appeals court ruled that a company’s optimistic statements alone did not prove that a company official intentionally misled investors.
Justice Department officials will likely seek internal Tesla communications as evidence that Musk or others knew they were making false statements, said Daniel Richman, a Columbia Law School professor and former federal prosecutor. That’s a challenge, Richman said, but the safety risk that comes with overselling self-driving systems “also shows how seriously prosecutors, judges and juries would take the testimony.”
DEADLY ACCIDENTS
Tesla’s claims about Autopilot and FSD have also come under scrutiny in government investigations and lawsuits.
Safety regulators and courts have raised concerns in recent months that company messages 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 struck and killed a motorcyclist with Autopilot engaged while the driver was looking at his phone, police records show. In a probable cause statement, a trooper noted the driver’s “admitted inattention while driving while in Autopilot mode… trusting the machine to drive for him.”
In Washington state, a driver remains “responsible for the safe and legal operation of this vehicle,” regardless of his or her technical ability, a state police spokesman said Reuters.
That same month, the U.S. National Highway Traffic Safety Administration opened an investigation into whether a Tesla recall of more than 2 million vehicles in December adequately addressed safety problems with Autopilot.
NHTSA declined to comment.
The recall followed a lengthy investigation by regulators after cars with Autopilot on repeatedly collided with vehicles at first responder scenes. Regulators then investigated hundreds of accidents in which Autopilot was engaged and identified 14 deaths and 54 injuries.
Tesla disputed the NHTSA’s findings but agreed to the recall, which used over-the-air software updates to warn inattentive drivers.
The NHTSA investigation found “a critical safety gap between drivers’ expectations” of Tesla’s technology “and the true capabilities of the system,” according to agency documents. “This vulnerability led to predictable abuse and preventable crashes.”