Tesla shares fell sharply on Tuesday after US regulators opened an investigation into a fatal crash in Texas involving one of the company’s vehicles, adding fresh scrutiny to the automaker’s driver-assistance technology.
The stock dropped about 5% in early trading as investors weighed the implications of the investigation against an already challenging backdrop for technology stocks.
The broader market also came under pressure. The S&P 500 fell 1%, while the Nasdaq Composite declined 1.5% as a technology selloff intensified. The Dow Jones Industrial Average traded around the flatline.
Technology stocks outside the semiconductor sector showed more resilience, with companies, including Microsoft and Amazon, advancing alongside defensive names such as Walmart, Procter & Gamble, and Johnson & Johnson.
NHTSA opens special crash investigation
The immediate catalyst for Tesla’s decline appeared to be an announcement from the National Highway Traffic Safety Administration late Monday that it had opened a special crash investigation into a fatal accident involving a Tesla Model 3.
The crash occurred in Katy, Texas, near Houston, where a Tesla vehicle struck a home, killing 76-year-old Martha Avila.
According to Harris County authorities, the driver, Michael Butler, told investigators he had been using Tesla’s partially automated driving systems when the vehicle left its lane and crashed into the residence.
The National Highway Traffic Safety Administration said it would examine the incident as part of a special investigation.
Tesla executives challenge driver’s account
Tesla executives publicly disputed aspects of the driver’s account following the crash.
Chief Executive Elon Musk questioned whether Tesla’s Full Self-Driving system could have been responsible for the accident.
“This crash makes no sense,” Musk wrote on X.
“FSD drives slowly through neighborhood streets and this was a high speed crash!” he added.
Tesla Vice President of Autopilot and AI Ashok Elluswamy also commented on the incident.
“In this case, the driver manually overrode self-driving by pressing the accelerator all the way to 100% of the accel pedal in this residential area,” Elluswamy wrote in a response on X.
“They reached a speed of 73 mph during the crash, and had the accelerator pressed even after the crash.”
The competing accounts remain under investigation and have not been independently verified.
Tesla’s owner manuals state that Full Self-Driving (Supervised) requires drivers to remain attentive, monitor the road, and be prepared to take control of the vehicle at any time.
Deliveries outlook remains constructive
Despite the regulatory overhang, Wall Street analysts remain focused on Tesla’s upcoming second-quarter delivery results.
UBS reiterated its Neutral rating on Tesla and maintained a $364 price target.
The firm raised its second-quarter delivery forecast to 405,000 vehicles from a previous estimate of 380,000 units.
That projection would represent a 5% increase from a year earlier and a 13% increase from the first quarter.
UBS noted that the estimate sits slightly above the Visible Alpha consensus forecast of 402,000 deliveries.
The bank said buyside expectations currently range from 400,000 to 420,000 vehicles, placing its forecast toward the lower end of investor expectations while acknowledging the potential for upside if Tesla finishes the quarter strongly.
Beyond vehicle deliveries, UBS also expects continued strength in Tesla’s energy business.
The firm forecasts energy storage deployments of 13.4 gigawatt-hours during the quarter, representing growth of 40% year-over-year and 53% sequentially.
For investors, Tuesday’s decline highlighted the tension between Tesla’s improving near-term operating outlook and the ongoing regulatory and legal scrutiny surrounding its driver-assistance technologies, which remain central to the company’s long-term autonomous driving ambitions.
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