The NHTSA has elevated its scrutiny of Tesla’s Full Self-Driving system by opening an Engineering Analysis to examine whether its degradation detection properly alerts drivers under low-visibility conditions like fog and heavy rain. The agency’s move follows investigations into nine collisions where the FSD system failed to detect reduced visibility before impact.

Tesla could face costly software upgrades or be mandated to install additional physical sensors if the NHTSA finds the FSD system inadequate, or it may be ordered to disable the feature entirely. Such outcomes would not only increase manufacturing expenses but also risk eroding consumer confidence in FSD safety.

Tesla will allocate roughly $2 billion to Elon Musk’s xAI startup to accelerate development of autonomous-driving algorithms and robotics technologies. While this tie-up could strengthen Tesla’s AI capabilities, it raises governance questions due to Musk holding key leadership positions in both companies and xAI’s unproven track record.