U.S. prosecutors are examining whether Tesla committed securities or wire fraud in Autopilot probe: Reuters

By Ciara Linnane

Prosecutors are reviewing whether Tesla or CEO Musk told consumers self-driving technology means cars can drive themselves

Tesla Inc.'s stock fell 2% Wednesday, after Reuters reported that U.S. prosecutors are reviewing whether the EV maker committed securities or wire fraud by misleading investors about its self-driving capabilities.

Citing three people familiar with the matter, Reuters said the Justice Department is examining whether Tesla (TSLA) or Chief Executive Elon Musk suggested that the company's Autopilot and Full Self-Driving systems mean cars can drive themselves. The systems assist with steering, braking and lane changes, but are not fully autonomous.

Regulators have already investigated hundreds of crashes - some fatal - involving the Tesla Autopilot system.

Investigators are exploring whether Tesla committed wire fraud, which would mean deception in interstate communications, by misleading consumers; and whether it committed securities fraud by misleading investors. Tesla did not respond to a Reuters request for comment.

The Justice Department declined to comment to MarketWatch.

The news comes just weeks after the National Highway Traffic Safety Administration launched an investigation of Tesla's December recall of 2 million vehicles equipped with Autopilot.

That probe will evaluate the "remedy adequacy" of the recall, which involved Model Y, Model X, Model S, Model 3 and Cybertrucks that were manufactured since 2012.

The NHTSA said its Office of Defects Investigation, or ODI, had identified concerns due to post-remedy crash events and the results of preliminary tests of remedied vehicles.

Tesla had initiated the December recall to review whether Autopilot "contained a defect that created an unreasonable risk to motor vehicle safety."

The ODI has identified at least 13 crashes involving one or more fatalities and many more that caused serious injuries, in which "foreseeable driver misuse of the system played an apparent role."

Tesla's Autopilot has been the subject of many complaints, including claims that drivers do not pay sufficient attention when using the technology. The company agreed after the December recall to update the software to increase warnings and alerts to drivers, as the Associated Press has reported.

To be sure, other self-driving technology has also come under scrutiny.

In late April, highway-safety regulators disclosed an investigation into two accidents allegedly involving Ford Motor Co.'s (F) BlueCruise advanced driver-assistance features, in which two Mustang Mach-Es collided with stationary vehicles in incidents that left three people dead.

Tesla, meanwhile, reportedly cleared a regulatory hurdle in China that will allow its new driver assistance technology to be added to cars sold there. The reported endorsement from a key Chinese auto association, which came after a visit from Musk, was welcomed by analysts.

"Winning FSD in China would be significant. It would unlock a significant fleet of Tesla vehicles able to charge subscription fees," RBC analyst Tom Narayan said in a note.

Tesla's stock has fallen 28% in the year to date, while the S&P 500 has gained 8.8%.

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-Ciara Linnane

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05-08-24 1324ET

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