Goldman On Tesla: Some NHTSA Investigations Can Take "Months Or Years"

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by Tyler Durden
Tuesday, Aug 17, 2021 - 03:20 PM

Adding to Tesla's woes on Tuesday, a day where the stock was slammed alongside a broader market selloff, was Goldman Sachs. The investment bank came out and commented on yesterday's news that the NHTSA had opened a broad-reaching investigation into Tesla's Autopilot feature. 

In its note, Goldman appeared anything but optimistic that the probe into Autopilot would be resolved quickly. “Given the current probe is related to a Level 2 driver-assist system, one solution could be for an enhanced driver monitoring system to ensure driver compliance with Tesla’s terms of use,” the investment bank wrote Tuesday morning.

The bank also said that although past NHTSA investigations had varied in length, that this some have taken as long as multiple months or years to complete. 

Recall, yesterday we reported that regulators in the United States had finally come to their senses and opened the long-overdue investigation. The U.S. National Highway Traffic Safety Administration (NHTSA) said the investigation includes Tesla's Model X, S and 3 for model years 2014-2021. The broad range of models and model years means that this could be the large-scale investigation that skeptics have been requesting for years, we noted.

The NHTSA said the investigation would assess technologies, methods "used to monitor, assist, and enforce the driver's engagement" during autopilot operation, according to Bloomberg.

GLJ Research's Gordon Johnson was the first analyst to weigh in yesterday, stating that the investigation could result in sentiment turning "decidedly downward" if sell-side peers begin to understand that Tesla's proclaimed autonomy prospects are nowhere near what many think.

Johnson's note opened by describing the situation and noting the investigation covers 765,000 vehicles: "The U.S. government has opened a formal investigation into TSLA's Autopilot partially automated driving system, saying it has trouble spotting parked emergency vehicles. The investigation covers 765,000 vehicles, almost everything that TSLA has sold in the U.S. since the start of the 2014 model year." 

"Autopilot has frequently been misused by TSLA drivers, who have been caught driving drunk or even riding in the back seat while a car rolled down a California highway," he wrote.

Johnson spoke to two lawyers about the investigation this morning and relayed their thoughts:

" our discussions with two attorneys this morning with knowledge of the matter, we see problems here for TSLA. More specifically, we believe TSLA’s biggest weakness is its weak measures (which have been alleged to be intentional) to make sure the driver is paying attention (which is EXACTLY what the NHTSA is investigating) – this is the opinion of both lawyers we spoke to this morning. More specifically, in the words of one lawyer: “Whether the system is weak at detecting emergency vehicles compared to other “FSD” systems or just insufficient overall, it shouldn’t be used at all if the system is not taking appropriate steps to make sure the driver is paying attention”.

He concluded by making the case that this investigation could be the first of many dominoes to fall that could reveal Tesla's autonomy prospects to be far worse than many have believed, resulting in exactly what we saw today: downward pressure on the stock.