Tesla Faces NHTSA Investigation into Full Self-Driving System

The National Highway Traffic Safety Administration escalated its investigation into TSLA's Full Self-Driving system to an Engineering Analysis — the final step before a potential recall order. The probe, which now covers 3.2 million Tesla vehicles including Model S, X, 3, Y, and Cybertruck, focuses on FSD's failure to detect reduced visibility conditions such as fog and sun glare.

NHTSA's investigation, originally launched in October 2024 as a preliminary evaluation after identifying four crashes in reduced visibility, has expanded to nine total incidents including one fatality and one injury. The agency found that FSD's degradation detection system fails to adequately warn drivers when cameras are blinded by common road conditions, and that Tesla may be under-reporting related crashes. An Engineering Analysis typically takes up to 18 months and involves deeper technical testing and peer manufacturer comparisons.

The escalation comes at a particularly sensitive time for TSLA, which is preparing to sell vehicles without steering wheels for its robotaxi service. A recall of FSD across 3.2 million vehicles would be a significant setback for Tesla's autonomous driving narrative and could impact the stock's AI premium. Investors should monitor NHTSA's information requests and whether Tesla issues a voluntary software update to address the visibility detection shortcomings before a formal recall is mandated.