Why Shares of Tesla Are Sinking Today
Shares of Tesla (TSLA) fell nearly 4% amid concerns over the upcoming robotaxi service launch in Austin, Texas. Investors are worried about safety issues following a recent report on a fatal accident involving Tesla's assisted-driving technology. Additionally, Tesla is engaged in a legal battle with The Washington Post over crash data related to its Autopilot system. The company's high valuation is largely based on future initiatives like full self-driving technology, but uncertainties and competition in this sector raise concerns about its risk-reward proposition.
With its robotaxi service debut just around the corner, shares of Tesla (TSLA -6.89%) traded nearly 4% lower, as of 11:12 a.m. ET today. There are a few potential reasons for the sell-off.
Possible concerns over robotaxi safety
It's been an eventful week for Tesla and CEO Elon Musk, who has been vocal in his opposition against President Trump's "one big beautiful" bill pending in Congress. But I think investors may be more focused on Tesla's upcoming limited robotaxi launch in Austin, Texas, which is reportedly starting next week.
Image source: Getty Images.
Yesterday, Bloomberg reported on a fatal car accident in 2023 involving Tesla's assisted-driving technology. The business publication also said it was one of the most-read stories on the website. However, it's important to note that the accident occurred under different software than Tesla is using now, which previously relied on 100% driver supervision.
Furthermore, The Washington Post and Tesla have been in an ongoing legal battle because the Post is trying to obtain crash data related to Tesla's Autopilot and Full Self-Driving (ASAD) technology.
The data is submitted to the U.S. National Highway Transportation Safety Administration (NHTSA), but most of the data is redacted due to confidentiality policies. In a filing related to the lawsuit, Tesla, according to the electric vehicle and Tesla news site Electrek, said the company "would suffer financial and economic harm if the requested information is disclosed."
Robotaxis drive the valuation
As I've now said many times, Tesla's extremely high valuation is not built on its core electric vehicle business, which is struggling, but on future initiatives like full self-driving (FSD) technology and the potential robotaxi service that Musk has talked about.
I don't necessarily doubt Tesla's ability to play a large role in the FSD wave, but there are still a lot of uncertainties about the new sector and the technology. There's also likely to be plenty of competition.
If FSD comes up short of expectations, I suspect Tesla's valuation would take a hit, which is why I don't love the risk-reward proposition right now.
