Tesla stock falls 6% as cybercab launch faces analyst, regulatory concerns

Tesla TSLA stock came under pressure on Friday, a day after the electric vehicle maker officially launched its Cybercab robotaxi in Austin, Texas.

Shares fell about 6.4% in trading, although the stock remained on track for its fourth weekly gain in five weeks.

The launch has drawn mixed reactions from analysts and raised new regulatory questions after the National Highway Traffic Safety Administration (NHTSA) opened an inquiry into Tesla’s certification of the driverless vehicle.

Wells Fargo maintained its Underweight rating and $130 price target on Tesla, implying about 63% downside from the stock’s current level.

The bank said the Cybercab launch likely fell short of investor expectations because of limited updates and a lack of surprises.

Cybercab launch faces competition

Tesla added its two-seat Cybercab to its Robotaxi network in Austin, marking the commercial debut of its purpose-built autonomous vehicle.

The gold-colored vehicle has no steering wheel or pedals and is designed to operate without a driver.

Public Cybercab rides are scheduled to begin Friday at 5 p.m. CT in limited areas of Austin.

Tesla has not disclosed how many vehicles will initially be available, while Wells Fargo noted that about 45 Cybercabs were registered in Texas around the launch.

The rollout comes as Tesla seeks to compete with Alphabet’s Waymo, which has established a larger US autonomous-vehicle operation.

GLJ Research also reiterated a Sell rating on Tesla, describing the event as a “sell-the-news” moment, according to TipRanks.

Tesla CEO Elon Musk has positioned autonomous driving and robotics as increasingly important to the company’s future.

The Cybercab is central to that strategy, with Tesla having started production in April and Musk previously saying production would grow “exponentially” later this year or next.

NHTSA opens Cybercab inquiry

The NHTSA said Friday it had opened an Audit Query covering about 1,000 Cybercab vehicles.

The agency is examining how Tesla determined that the vehicle complies with federal safety regulations.

The issue centers on the Cybercab’s lack of conventional manual controls. Existing US vehicle safety standards were largely written around human-driven vehicles and require manual controls.

Michael Brooks, executive director of the Center for Auto Safety, said in a Reuters report that, “I don’t think there is a reasonable interpretation that can be made to suggest that the Cybercab can comply with the Federal Motor Vehicle Safety Standards.”

Carnegie Mellon University professor and autonomous-vehicle safety expert Philip Koopman said Tesla has historically “tested limits and pushed boundaries on regulations.” He added that he expects Tesla to test those limits with the Cybercab.

Tesla valuation under scrutiny

The regulatory questions add another challenge as Tesla seeks to expand its robotaxi operations.

The company currently operates a limited paid robotaxi service in Texas and Florida using Model Y vehicles, which retain manual controls required under federal standards and have human backup drivers in some cars.

Bryant Walker Smith, a University of South Carolina law professor specializing in autonomous-driving regulation, questioned whether Tesla’s technology is ready for broad deployment.

He said public information does not indicate that Tesla is “anywhere close” to safely and reliably deploying an automated driving system across the conditions required for a vehicle without conventional controls.

For vehicles that do not comply with federal safety standards, NHTSA provides an exemption process that limits deployment to 2,500 vehicles annually.

Tesla’s engineering chief Lars Moravy has said Cybercab would not be subject to that cap, although he did not provide details.

Tesla’s approach could face further regulatory scrutiny.

Amazon-backed Zoox previously attempted to self-certify a similar driverless vehicle, but withdrew its certification after an NHTSA investigation. Zoox later received a federal exemption for limited commercial deployment.

Meanwhile, investor concerns extend beyond the Cybercab launch itself. Gary Black cautioned Tesla shareholders against conflating enthusiasm for the company with enthusiasm for its stock, saying, “Loving the company doesn’t mean you should love the stock.” He urged investors to conduct their own research rather than rely on management’s promises.