Tesla shareholders sue Musk over misleading claims on faltering Robotaxi

Tesla and Elon Musk are facing a class-action lawsuit from shareholders who allege that they failed to disclose serious risks associated with the company's self-driving technology. Filed on Monday night, the lawsuit accuses Musk and Tesla of securities fraud given the recent incidents involving their self-driving vehicles.

Allegations of Misleading Claims

The controversy stems from a public test of Tesla’s self-driving taxis conducted in late June near Austin, Texas, which reportedly demonstrated unsafe driving behavior such as speeding, abrupt braking, and erratic lane changes. This pilot program is now under investigation by the National Highway Traffic Safety Administration (NHTSA), which oversees transportation safety regulations in the United States.

Shareholders claim that Musk and Tesla have made exaggerated claims about the effectiveness and financial prospects tied to their autonomous driving technology. In the lawsuit, shareholders point to statements made by Musk during a conference call on April 22, where he insisted that Tesla was "laser-focused on bringing Robotaxi to Austin in June." Additionally, Tesla claimed that its autonomous driving approach would allow for "scalable and safe deployment across diverse geographies and use cases."

Tesla's Robotaxi Ambitions Face Regulatory Hurdles

Expanding the Robotaxi service is pivotal for Tesla, particularly as the company confronts declining demand for older electric vehicle models and growing criticism over Musk's political views. Musk has stated his intention to make the Robotaxi service available to half of the US population by the end of the year.

Despite these claims of expansion, particularly in the San Francisco Bay Area, regulations currently inhibit Tesla from offering paid autonomous rides without obtaining a renewed permit. This presents a large hurdle for Musk in addition to having to reassure the public regarding the safety of the technology.

This is especially difficult given a recent case, where a Florida jury found Tesla to be 33% liable for a deadly crash in 2019 involving its self-driving software, which resulted in a $243 million verdict against the company for damages. Tesla attributed responsibility for the incident to the driver and plans to appeal the decision.