Tesla's Future: Robotaxis and Regulatory Challenges

By Chris Kirkham and Rachael Levy
(Reuters) – As Tesla’s electric-vehicle sales have flattened this year, CEO Elon Musk has increasingly staked the company’s future on his vision for self-driving robotaxis, despite the massive technological and regulatory obstacles in delivering them.

Musk, a major supporter of President-elect Donald Trump, may have the influence to tackle these regulatory challenges.
Tesla (NASDAQ:TSLA) currently navigates a patchwork of state laws on autonomous vehicles, which Musk criticized in an earnings call as “incredibly painful.” He suggested advocating for a federal approval process if Trump followed through on the promise to appoint him as “efficiency czar.”

Musk indicated, "If there’s a department of government efficiency, I’ll try to help make that happen."

On Tuesday, Trump appointed Musk and another ally to lead this entity, though its structure remains vague.

Musk's influence might extend to significant decisions such as the next Transportation Department secretary, given the department's role in regulating automakers and pushing changes on self-driving rules.

However, even if regulations turn favorable, Tesla faces substantial technological and legal challenges in deploying driverless vehicles, along with complications regarding insurance, as revealed in interviews with experts and a review of state laws.

Currently, Tesla lags behind competitors in California, which is crucial for testing autonomous vehicles. While Tesla has logged only 562 testing miles since 2016, rivals like Waymo have completed over 13 million miles and secured the necessary regulatory approvals to operate driverless vehicles commercially.

If Musk can achieve federal regulations that preempt state laws, it may enable Tesla to bypass California's stringent regulations, although this remains speculative.

Tesla holds the lowest-level California permit for human-driver oversight and has not filed reports to regulators since 2019. Other companies, including Amazon’s Zoox and GM’s Cruise, have accumulated millions of testing miles and obtained driverless-testing approvals, setting a high benchmark for Tesla.

Safety experts express skepticism regarding Tesla's current “Full Self-Driving” (FSD) capabilities, emphasizing that its systems, which still need human monitoring, are far from being viable for autonomous operation.

Musk has projected readiness for self-driving Teslas next year, but investors have reacted cautiously, reflected in a 9% drop in Tesla's stock following a recent product presentation.

Despite the lack of federal standards for autonomous driving, Musk has pushed for measures with Congress to streamline regulations. He is poised as a prominent figure in Trump’s circle and has participated in discussions regarding key cabinet positions.

Under a Trump administration, the National Highway Traffic Safety Administration (NHTSA) could liberalize autonomous-vehicle standards, but whether it would restrict states from enacting their regulations is uncertain.

Musk's ambitions to introduce autonomous vehicles are primarily tied to a model that aims to deploy millions of self-driving cars universally, whereas competitors generally limit their services to specific areas.

Tesla's heavy reliance on computer vision, in contrast to Waymo’s multi-sensor approach, has raised concerns, especially given the limited miles logged for testing and potential regulatory hurdles.

Moreover, legal liability and insurance for accidents involving fully autonomous vehicles pose substantial challenges. Current consumer insurance does not exist for driverless vehicles, and companies depend on commercial policies for coverage.

While some states maintain minimal regulations for autonomous vehicles, others impose strict requirements, complicating Tesla’s potential rollouts. Less stringent oversight might increase legal risks, as companies would lack the protective evidence offered by regulatory approvals in cases of crashes.

In summary, industry experts agree that Tesla faces significant obstacles on its path to autonomous driving, with assurances regarding safety and compliance remaining critical for successful implementation.