Tesla to recall 2mn vehicles

US regulator deems autopilot feature unsafe in a potential blow to long-term Tesla software thesis

Tesla to recall 2mn vehicles
Tesla's FSD technology has been deemed unsafe

 Elon Musk-led US EV pure play Tesla has been hit by a recall of 2mn vehicles, after a US regulator found its autopilot feature posed safety risks. The National Highway Traffic Safety Administration (NHTSA) has issued a do not drive directive for the affected Tesla models after a two-year investigation into 11 Tesla crashes since 2018 involving its level 2 autonomous driving (AD) software.

The recall will affect vehicles from all Tesla model years that are quipped with any version of Tesla’s autosteer feature, including all versions of the autosteer function up to the version that contain the recall remedy, the NHTSA says.

“In certain circumstances when Autosteer is engaged, if a driver misuses the SAE Level 2 advanced driver-assistance feature such that they fail to maintain continuous and sustained responsibility for vehicle operation and are unprepared to intervene, fail to recognise when the feature is cancelled or not engaged, and/or fail to recognise when the feature is operating in situations where its functionality may be limited, there may be an increased risk of a collision,” the regulator says in the recall documents.

Tesla says it will release an over-the-air safety update to correct the issue but that owners of affected vehicles may not be notified until February.

In a statement on Musk-owned social media platform X, formerly Twitter, before the recall announcement, Tesla defended its autopilot software and argued that its safety record speaks for itself. Tesla has also repeatedly emphasised that its ‘full self-driving’ feature is a Level 2 autonomous system that requires the driver to pay significant attention to the road.

“The data strongly indicates our customers are far safer by having the choice to decide when it is appropriate to engage Autopilot features. When used properly, it provides safety benefits on all road classes,” Tesla said.

“In the fourth quarter of 2022, we recorded one crash for every 4.85mn miles driven in which drivers were using autopilot technology. For drivers who were not using autopilot technology, we recorded one crash for every 1.4mn miles driven,” the automaker added.

But the NHTSA found in its investigation that “in certain circumstances when Autosteer is engaged, the prominence and scope of the feature’s controls may not be sufficient to prevent driver misuse of the SAE Level 2 advanced driver assistance feature”.

It is the thirteenth recall to affect Tesla this year alone, although this one is by far the widest reaching. Last month saw 159 Tesla EVs recalled due to faulty airbags, following 54,000 models being recalled in October for a faulty brake fluid light which diminished the vehicles’ braking ability.

Technology thesis

While most of the firm’s other recalls this year have affected only tens or hundreds of models and resulted from hardware issues, February saw over 362,000 Tesla recalled due to the company’s FSD software allowing vehicles to exceed speed limits and travel through intersections.

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Some analysts are bullish on Tesla’s potential to pivot towards a software-oriented business on top of automotive sales, including Wedbush’s Dan Ives, who calls Tesla a “disruptive technology vendor”, although there is also scepticism in some quarters.

Musk has repeatedly spoken of what he views as Tesla’s biggest long-term opportunity for growth. “I think the Tesla fleet value increase at the point which we can upload full self-driving and is approved by regulators will be the single biggest step change in asset value, maybe in history,” he said at the company’s Q2 results in July

However, recalls related to FSD or autopilot mode will dampen these hopes, even if Tesla can transmit software updates over the air to fix potential issues. Furthermore, the NHTSA ruling does not dispute Tesla’s argument that its autopilot features were used incorrectly in the crashes under investigation, but rather that the features “may not be sufficient to prevent driver misuse”.

Even though the regulator has not found fundamental flaws in the autopilot features — potentially a source of encouragement for Tesla — if a new benchmark is set for automakers to be responsible for warning drivers about the scope of AD features, the long-term value thesis for AD, as well as hopes of a spun-off FSD licensing business for Tesla, may face some unforeseen obstacles.

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