Tesla's Growing Judicial Risk Amid 'Technology Bubble' Suspicions

"US DOJ Requests Autonomous Driving Documents... Negative Impact on Business" Disclosure

[Asia Economy Reporter Yujin Cho] Tesla, which endured a difficult year last year due to owner risks and stock price declines, is now facing intensified legal risks amid suspicions of a 'technology bubble' in its core electric vehicle business this year.

According to major foreign media including CNN on the 31st (local time), Tesla announced that it received a request from the Department of Justice to submit documents related to its driver assistance features, 'Full Self-Driving (FSD)' and 'Autopilot.' This request from the DOJ is part of an investigation into FSD and Autopilot, which have been repeatedly controversial for false and exaggerated advertising. The U.S. Department of Justice reportedly began a criminal investigation into Tesla's driver assistance features in October last year, according to the Wall Street Journal (WSJ).

Tesla is also facing various lawsuit risks related to autonomous driving. The company was sued last year on charges of misleading consumers with false information about autonomous driving to increase sales and attract investment, and it will face four consecutive trials starting with the first trial scheduled this month. The New York Times (NYT) reported that Tesla is facing litigation risks this year, having to fight in court against claims that it deliberately inflated consumer expectations and downplayed related risks in multiple ongoing lawsuits.

Tesla's autonomous driving technology continues to be plagued by various accidents, and as the commercialization of full self-driving is repeatedly delayed, technical skepticism is growing. There is also an assessment that the technological gap in AI, the core of autonomous driving technology, is widening compared to latecomers. Recently, an internal source's revelation that a promotional video for the 2016 Model X's autonomous driving feature was staged rather than actual footage has become a basis for these suspicions.

Tesla denies these allegations. In its disclosure on the day, Tesla stated, "To the best of our knowledge, no government agency has concluded that any wrongdoing has occurred in any ongoing investigation." It also warned investors that "if the government decides to take law enforcement actions, it could have a material adverse effect on the company's business, operating results, prospects, cash flows, and financial condition."

In addition to the Department of Justice, Tesla is also under investigation by the National Highway Traffic Safety Administration (NHTSA), the automotive safety regulatory authority. Last June, the agency escalated the investigation into 830,000 Tesla vehicles equipped with Autopilot, increasing the possibility of a recall.

Tesla currently offers Autopilot, which assists with steering, acceleration, and braking, as a standard option, and sells Enhanced Autopilot with automatic lane changing and automatic parking, as well as Full Self-Driving features that identify and control traffic lights and stop signs, as paid options.

Tesla's stock price, listed on the U.S. Nasdaq market, fell 0.39% in after-hours trading as the disclosure acted as a negative factor.

Since CEO Elon Musk acquired Twitter, Tesla's stock price has accelerated its decline, dropping nearly 70% over the entire last year. On the first trading day of the new year, January 3rd, it plunged 12.2% to around $110 per share, but later recovered to around $170 due to positive factors such as improved fourth-quarter earnings.