The share price of electric vehicle (EV) manufacturer Tesla (NASDAQ: TSLA) is witnessing notable losses in the pre-market as investors appear rattled by the announcement of a federal investigation into one of its driverless features.
Ahead of the market opening on January 7, TSLA’s share price was down 1.91%, valued at $403. Notably, Tesla’s share price ended the previous trading session valued at $411, ending the day up 0.15%.
These losses threaten Tesla’s ability to sustain momentum above the $400 level. Plunging below $400 could invalidate the recent bullish momentum inspired by post-election optimism.
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Why TSLA stock is down
The TSLA share price drop follows a Reuters report indicating that the National Highway Traffic Safety Administration (NHTSA) has launched a probe into 2.6 million vehicles equipped with the “Actually Smart Summon” feature.
The investigation stems from reports of crashes where vehicles failed to detect obstacles such as posts or parked cars, raising concerns about the feature’s safety.
Introduced in September, ‘Actually Smart Summon’ allows users to move their vehicles remotely using a smartphone app. However, the NHTSA is examining issues like limited user reaction time, connectivity delays, and the system’s performance in unpredictable conditions.
This marks Tesla’s second major investigation in recent months. In October, the NHTSA opened a probe into its Full Self-Driving software after reports of collisions, including one fatal crash.
The increased regulatory scrutiny comes as Tesla CEO Elon Musk continues to push for advancements in autonomous technology.
Many anticipated that these innovations would gain traction this year. However, there is speculation that the technology may face fewer regulatory hurdles under the Donald Trump administration, which has maintained close ties with Musk.
To that end, investors might be rattled by the new probe, as it could derail the progress of Tesla’s autonomous technology. The investigation could lead to recalls or updates, posing challenges to Tesla’s self-driving ambitions.
Analyst downgrades Tesla stock
Adding to Tesla’s woes, an analyst at Bank of America (NYSE: BAC) has downgraded the stock from ‘Buy’ to ‘Neutral’ while raising its price target from $400 to $490. Although the new target reflects potential upside, BOFA cited valuation concerns and execution risks as reasons for the downgrade.
Analyst John Murphy noted that Tesla’s stock already accounts for much of its long-term potential in core automotive, robotaxi, Optimus, and energy solutions.
Key growth catalysts include the launch of two new models and robotaxi services in 2025, the Shanghai Megapack ramp, and updates on FSD subscribers.
However, challenges like execution risks, policy uncertainty, and a potential capital raise tempered the analyst’s enthusiasm.
Meanwhile, mounting regulatory questions arise when Tesla’s vehicle deliveries for the last quarter of 2024 failed to meet consensus estimates. In this regard, as reported by Finbold, Gordon Johnson of GLJ Research warned that Tesla could experience a ‘bloodbath’ after Q4 earnings results are announced.
Featured image via Shutterstock
