Tesla Stock Surges 8% on Robotaxi Launch but Faces Regulatory Scrutiny

Electric vehicle maker Tesla’s (TSLA) stock gained 8.2% on June 23, following the highly anticipated launch of its robotaxis in Austin, Texas, on Sunday. However, CEO Elon Musk’s much-hyped robotaxis have already caught regulators’ attention for violating traffic rules in South Austin. Tesla is already taking measures to avoid accidents by not operating its vehicles in bad weather or at difficult intersections, and will not accept rides for passengers below 18 years of age.

The U.S. National Highway Traffic Safety Administration (NHTSA) has reportedly contacted Tesla seeking answers to its queries after reviewing several videos posted online that show the company’s robotaxis are driving erratically on city roads. Although the service was offered to a select group of invitees within a geofenced area, Tesla’s autonomous vehicle technology has failed to live up to expectations. While the matter has become public, Tesla has told the agency that its answers to queries about safety of its robotaxi service in Texas must remain confidential and should not be disclosed publicly.

Here’s What Happened with Tesla’s Robotaxis

In videos shared on social media posts yesterday, Tesla’s robotaxis were seen driving the wrong way down a road, some were seen speeding, while another braked hard in the middle of traffic, reportedly citing “stationary police vehicles outside its driving path.” The NHTSA stated that it “does not pre-approve new technologies or vehicle systems,” but rather automakers certify that each vehicle model fits the federal motor vehicle’s strict safety standards.

In Tesla’s case, only its Model Y SUVs are being used for the robotaxi service, with about a dozen deployed for the service in Austin. The agency has stated that it will investigate “incidents involving potential safety defects” and take necessary action to prevent such incidences and protect road safety.

Meanwhile, the agency has already been investigating accidents involving Tesla autos using its Full Self-Driving (FSD) feature under conditions of less visibility. The investigation, which started in October 2024, covers about 2.4 million Tesla autos fitted with FSD technology. This follows four reported crashes, including a fatal one in 2023.

Tesla faces stiff competition from Alphabet’s (GOOGL) Waymo, which has been successfully deploying its autonomous vehicles for ride-hailing services in several cities across the U.S.

Is Tesla a Buy, Hold, or Sell?

Analysts remain divided about Tesla’s long-term stock trajectory. On TipRanks, TSLA stock has a Moderate Buy consensus rating based on nine Buys, six Holds, and one Sell rating. Also, the average Tesla price target of $348.39 implies that shares are almost fully valued at current levels. Year-to-date, TSLA stock has lost 13.7%.

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