Shares of Tesla, the electric vehicle powerhouse, experienced a notable downturn in Wednesday’s trading session following a significant directive from the National Highway Traffic Safety Administration (NHTSA). The federal agency mandated Tesla to deploy a substantial software update to its renowned Autopilot feature, impacting a vast number of vehicles.
The NHTSA’s decision comes after a prolonged investigation spanning over two years into Tesla’s Autopilot and Full Self-Driving (FSD) technologies. The update will affect more than 2 million vehicles, encompassing Tesla’s Model S, Model X, Model 3, and Model Y.
Tesla’s Autopilot system, a standard feature in all its vehicles, is marketed as an advanced driver-assistance system. Tesla emphasizes that while the system and its enhanced versions are sophisticated, they still require a fully attentive driver ready to take control at any moment.
This extensive update, which Tesla noted affects approximately 2.03 million cars in the U.S., has already begun rolling out. The updated software has been incorporated into vehicles produced from early December onwards.
Responding to the update, the NHTSA stated, “Automated technology holds great promise for improving safety, but only when it is deployed responsibly. Today’s action is an example of improving automated systems by prioritizing safety.”
Following this news, Tesla shares dropped by 2.5% to $231.15 each in mid-day trading, marking an extension of the stock’s six-month downturn to about 10.65%.
Amid these developments, Tesla CEO Elon Musk continues to champion the potential of FSD technology, both in terms of advancement and profitability. Musk has expressed openness to licensing this technology to other manufacturers, a move that could significantly amplify its reach and impact.
“We’re in preliminary discussions with a major carmaker about using the Tesla FSD,” Musk shared earlier this year, signaling Tesla’s willingness to share its advancements. “We’re not trying to keep this to ourselves. We’re more than happy to license it to others.”
This licensing prospect emerged as a standout point in Tesla’s second-quarter earnings discussion, amidst challenges like anticipated production slowdowns and a complex macroeconomic environment.
With data from roughly 300 million miles of driving, expected to soon skyrocket into billions, Musk envisions Tesla gaining a substantial competitive edge. “I’ve been wrong before, but I see us being better than human drivers by the end of this year,” he asserted, emphasizing Tesla’s commitment to leveraging AI and other technologies.
Gene Munster, an analyst at Deepwater Asset Management and a long-standing Tesla supporter, estimates that FSD technology licensing could yield up to $20 billion in annual revenue within five years of its initial adoption. “If Tesla lands one OEM, the likelihood of others joining is high,” Munster noted, drawing parallels to Tesla’s recent success in partnering with multiple carmakers for its charging network.
As Tesla navigates this regulatory update and explores new partnerships, the EV industry watches closely, recognizing the company’s significant influence on the future of autonomous driving technology.