What happened

Shares of Tesla (NASDAQ: TSLA) were trading lower on Monday after a U.S. government agency announced an investigation into the companys Autopilot hands-free driving system.

As of 11:30 a.m. EDT, Teslas stock was down about 5.1% from Fridays closing price.

So what

The National Highway Traffic Safety Administration (NHTSA) said that it has opened a formal safety probe into Teslas driver-assist systems after a series of crashes involving emergency vehicles. (The investigation was opened on Friday, but it was first reported on Monday morning.)

NHTSA said that it opened the investigation after identifying 11 crashes since the beginning of 2018 in which Teslas encountered first responder scenes and subsequently struck one or more vehicles at those scenes.

All of the Teslas involved had Autopilot or Traffic Aware Cruise Control, a dynamic cruise-control system included in the Autopilot package, engaged during the approach to the crashes, the agency said.


The NHTSAs investigation could lead to a recall of Teslas with the Autopilot option. Image source: Tesla.

NHTSAs move to open an investigation is just that: the beginning of an investigation. As of right now, Tesla isnt facing any consequences. But NHTSA does have the power to force Tesla to recall the affected vehicles, which could impose limits on its Autopilot and Full Self Driving systems, reducing the companys perceived technological lead.

While a software revision isnt likely to be a material expense for Tesla, NHTSA could also impose fines, or require that Tesla make changes to the vehicles hardware, or both.

Thats why the stock is down today.

Now what

While NHTSAs investigation is focused on Tesla, its also a signal to the industry at large that its regulators are now looking carefully at the so-called self-driving space. Auto investors should note that this could have consequences for other companies developing advanced driver-assist or autonomous-vehicle systems.

Thats likely to be a good thing for safety in the longer term. But it might be a not-so-good thing for some other high-flying stocks in the near term.

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John Rosevear has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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