Is Tesla headed to $24 as US investigates fatal FSD crash?

Tesla’s (NASDAQ: TSLA) recent ‘We, Robot’ event, positioned as a showcase of the electric vehicle (EV) maker’s cutting-edge advancements in autonomous driving, has not panned out quite as well as the bigger bulls have hoped.

Since then, developments have likewise been less than positive. In another hit for the company, U.S. authorities are probing a series of crashes – one of them fatal – involving cars equipped with ‘full self-driving (FSD),’ per a Bloomberg report from October 18.

Said crashes occurred while Tesla’s self-driving technology was engaged and under conditions of reduced visibility. It is worth pointing out that, despite criticism from some experts, Tesla has decided to use cameras and powerful computing systems for its ‘FSD.’

The approach rejects detection equipment such as Radar and Lidar and is intended to partially mimic how human drivers perceive the road and their environment. 

Human vision is famously subject to atmospheric phenomena such as fog, and numerous man-caused crashes occurred in situations of reduced visibility.

Is Tesla self-driving in jeopardy?

Though the investigation by the National Highway Traffic Safety Administration into whether ‘FSD’ is equipped to deal with situations of reduced visibility – such as fog – is only in its opening stages, and TSLA stock is yet to react to the probe, the news comes at a time when the company is facing scrutiny over a string of other perceived failures.

In fact, despite the claims of ‘FSD’ being in advanced stages, the technology is reported to need human intervention to prevent accidents of varying severity once every 13 miles. For comparison, Waymo averaged nearly 20,000 miles per disengagement as far back as 2021.

How 13-mile figure led to Tesla’s Street low price target

Some critics, such as Gordon Johnson of GJL Research, a prominent Tesla bear, concluded that such a statistic means the EV maker’s autonomous vehicles can only drive 13 miles before crashing.

Johnson also used this statistic to reinforce his prediction that TSLA stock’s price should be closer to $24 than its press time levels of $219.95. 

Despite being usually represented on aggregate platforms as such, this exceptionally low number is less of a traditional price target and more an expression of an estimate of a ‘fair’ valuation based on factors such as the forward price-to-earnings (P/E) ratio and a rejection of Tesla as a big tech firm.

Once the share prices of other major but traditional car makers are taken into account, the logic behind the ‘price target’ starts becoming evident. For example, at the closing bell on October 17, General Motors (NYSE: GM) shares stood at $49.38 and Ford (NYSE: F) stock at $11.07.

Can an autonomous car go to jail?

Additionally, the ‘FSD’ fatality has brought back into focus the debate of who should be held responsible in cases in which autonomous cars actually kill a pedestrian. 

Presumably – and particularly in cases where there are no manual controls, such as in the ‘Robotaxi’ – the occupants cannot be blamed. 

This raises the question of whether the law will hold the programmers, engineers, or maybe even the executives of a company responsible or if it will see accidents as no different from natural disasters.

Can Tesla still claim to be a technology stock?

Apart from the self-driving issues, the probe will likely compound the problems caused by the ‘We, Robot’ event. 

Not only were analysts severely disappointed with the demonstration’s lack of detail, but more recent revelations indicate that the ‘Optimus’ robot is far less impressive than it appears at the surface level.

Whatever the resolution of the investigation – and whatever Tesla is or is not hiding behind the curtains in terms of its technology – it appears that October 2024 did more to harm the firm’s position as the ‘most undervalued AI name’ in the market, and reinforced the notion it is a mere car maker.

TSLA stock price chart

Meanwhile and despite an extended session reaction to the probe, Tesla stock has been on a rocky road in recent trading. The last full week in the stock market indicates a slight rally – amounting to 1.49% – but zooming out even slightly reveals it is more of a recovery following the ‘We, Robot’ collapse.

In fact, TSLA shares are, at press time on October 18, at almost the exact same place they were 30 days earlier, before ‘Robotaxi’ enthusiasm swept investors. Finally, at its press time price of $219.95, Tesla stock is 11.44% in the red year-to-date (YTD).