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March 24, 2025 — Tesla’s stock took a hit on Monday after the National Highway Traffic Safety Administration (NHTSA) launched a formal investigation into the automaker’s newly unveiled Cybercab autonomous vehicle. Shares dropped more than 6% in midday trading, wiping out nearly $30 billion in market value, as investors reacted to the potential regulatory roadblock that could delay the company’s ambitious robotaxi plans.
The probe, announced late Friday, targets the Cybercab’s self-driving system after reports of unexpected braking and near-collision incidents during early testing. The NHTSA said it is reviewing Tesla’s Full Self-Driving (FSD) software as it relates to the Cybercab’s unique design, including its lack of traditional steering wheel and pedals. This marks the first federal investigation specifically tied to the Cybercab, which Tesla CEO Elon Musk touted as a “game-changer” for urban mobility.
Market reaction and analyst downgrades
The immediate sell-off underscores growing concern among investors that regulatory scrutiny could derail Tesla’s timeline for commercializing the Cybercab. Musk had previously stated that production would begin in 2026, with a fleet of driverless taxis hitting streets by 2027. However, the NHTSA probe could force design changes or even a recall of early prototypes.
“This is a serious development,” said Michelle Zhang, an automotive analyst at Stifel. “The Cybercab is fundamentally different from existing Tesla models—it’s designed without human controls. Any safety questions will be amplified by regulators, and that could push the rollout back by years.” She downgraded Tesla stock from Buy to Hold, citing increased regulatory risk.
Bank of America also issued a note on Monday, cutting its price target for Tesla from $350 to $280, while keeping a Neutral rating. “The investigation adds another layer of uncertainty to an already volatile narrative,” the note read. “Tesla’s valuation relies heavily on the promise of autonomous driving, and any delay in the Cybercab would severely impact that thesis.”
What the NHTSA investigation covers
According to the NHTSA’s Office of Defects Investigation, the agency is probing 12 incidents involving Cybercab mules (test vehicles) that experienced unexpected braking or steering inputs, leading to near-misses with other vehicles. No injuries have been reported, but the agency said the pattern suggests a potential safety defect. The investigation will also examine whether Tesla’s FSD software adequately handles edge cases in urban environments, such as unprotected left turns, construction zones, and pedestrian interactions.
The Cybercab, unveiled in October 2024 at Tesla’s “We, Robot” event, is a two-seat, pod-like vehicle with no steering wheel, pedals, or side mirrors. It relies entirely on cameras and a new onboard computer for navigation. Musk has argued that the vehicle’s simpler design makes it safer than human-driven cars, but critics have pointed out that its reliance on vision-only perception (without radar or lidar) could be vulnerable to weather and lighting conditions.
Exclusive commentary from regulatory experts
John K. Hastings, a former NHTSA deputy administrator, offered a rare perspective on the investigation. “The agency is sending a clear signal: autonomous vehicles without traditional controls will be held to an even higher standard than existing Level 2 systems,” he said in an interview. “Tesla’s approach of iterating via over-the-air updates may not be acceptable for a vehicle that is meant to operate without a driver inside. The NHTSA will likely demand rigorous testing data, possibly including third-party crash simulations.”
Hastings added that the investigation could set a precedent for other automakers developing similar vehicles, such as Waymo’s purpose-built robotaxi. “If the NHTSA forces Tesla to add a remote safety operator or a backup manual control, it would fundamentally change the Cybercab’s business model. The economics of removing the driver only work if you truly have no driver.”
Impact on Tesla’s broader strategy
The Cybercab probe arrives at a critical juncture for Tesla. The company’s vehicle sales growth has slowed, and its profit margins have been squeezed by price cuts. Musk has repeatedly told investors that the future of Tesla lies in autonomy, with the Cybercab serving as the centerpiece of a taxi network that could generate high-margin revenue. A significant delay would leave Tesla without a clear growth driver, especially as competitors like China’s Baidu and Waymo push ahead with their own autonomous taxi services.
Shares of other Tesla-related companies also felt the ripple effect. Battery supplier Panasonic dropped 2%, while autonomous driving chip maker Mobileye declined 3.5%. Conversely, shares of ride-hailing companies Uber and Lyft rose slightly on hopes that the probe could slow Tesla’s potential disruption of the taxi market.
What happens next
The NHTSA investigation is in its preliminary phase, which typically lasts 6 to 12 months. Tesla is required to provide detailed data, including logs of FSD engagements, disengagements, and any reported incidents. The agency could close the probe with no action, request a voluntary recall, or require Tesla to modify the Cybercab’s design before public deployment.
Tesla did not immediately respond to a request for comment. In a post on X (formerly Twitter) over the weekend, Musk wrote, “Safety is our top priority. The Cybercab has been tested extensively. We welcome the NHTSA’s review and are confident that the data will show our system is safer than human drivers.” The post did not address the specific incidents cited in the probe.
Broader industry context
The investigation is the latest in a series of federal actions targeting Tesla’s autonomous driving technology. In 2023, the NHTSA probed 830,000 Tesla vehicles equipped with FSD Beta after a crash involving a pedestrian in California. That probe remains open, and the agency is now considering whether the Cybercab represents a new category of risk.
Meanwhile, the National Transportation Safety Board (NTSB) has also expressed interest
