Tesla Faces Potential Fraud Probe by the DOJ. Here's Why
The Justice Department is investigating Tesla for potential securities and wire fraud, according to media reports.
The Department of Justice (DOJ) is investigating Tesla (TSLA) to determine if it committed securities or wire fraud by misleading consumers about its Autopilot self-driving technology, people familiar with the matter told Reuters.
Tesla's Autopilot and Full Self-Drive (FSD) systems for its electric vehicles (EVs) are not fully autonomous. While Tesla says drivers "must be in control of your vehicle, pay attention to its surroundings and be ready to take immediate action including braking," the DOJ is examining other statements made by the company and its CEO, Elon Musk, which may have suggested that the cars can drive themselves.
One example Reuters gives is a video on Tesla's website shows a car using its Autopilot technology and states, "The person in the driver's seat is only there for legal reasons. He is not doing anything. The car is driving itself."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"The probe, which is not evidence of wrongdoing, could result in criminal charges, civil sanctions, or no action," Reuters said. "Prosecutors are far from deciding how to proceed, one of the sources said, in part because they are sifting through voluminous documents Tesla provided in response to subpoenas."
This is hardly the first investigation into Tesla's Autopilot system. In April, the National Highway of Traffic Safety Administration (NHTSA) said it is looking into the company's late-2023 recall of more than 2 million vehicles that include the Basic Autopilot package.
Additionally, the Securities and Exchange Commission (SEC) is investigating the representations of Tesla's self-driving capabilities to investors, a source told Reuters. Both the DOJ and SEC declined to comment on the report.
Is Tesla stock a buy, sell or hold?
Wednesday's headlines have Tesla shares trading down more than 2% in intraday action, making it the worst Magnificent 7 stock so far. Longer term, the stock is down 30% for the year to date, pushing most analysts to the sidelines.
According to S&P Global Market Intelligence, the consensus analyst target price for Tesla stock is $181.73, representing implied upside of about 4% to current levels. Meanwhile, the consensus recommendation is a Hold.
Still, Wedbush analyst Daniel Ives has a Buy rating and $275 price target on Tesla, representing implied upside of more than 57% to current levels.
Ives recently called Tesla's approval for FSD in China "a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand." The analyst added that while "the long-term valuation story at Tesla hinges on FSD and autonomous, a key missing piece in that puzzle is Tesla making FSD available in China which is now a done deal."
Related Content
-
S&P 500 Hits New High Before Big Tech Earnings, Fed: Stock Market TodayThe tech-heavy Nasdaq also shone in Tuesday's session, while UnitedHealth dragged on the blue-chip Dow Jones Industrial Average.
-
4% and Chill? Find Out If This Distribution Rule Fits Your RetirementTake this simple quiz to discover whether the 4% Rule will work for you in retirement.
-
Oregon Tax Kicker in 2026: What's Your Refund?State Tax The Oregon kicker for 2025 state income taxes is coming. Here's how to calculate your credit and the eligibility rules.
-
S&P 500 Hits New High Before Big Tech Earnings, Fed: Stock Market Today
The tech-heavy Nasdaq also shone in Tuesday's session, while UnitedHealth dragged on the blue-chip Dow Jones Industrial Average.
-
Yes, Artificial Intelligence Stocks Are BoomingIt's fair to ask about the latest tech boom, "Is it really different this time?"
-
I'm an Estate Planning Attorney: These Are the Estate Plan Details You Need to Discuss (And What to Keep Private)Gen Xers and Millennials would like to know if they're going to inherit (and how much), but Baby Boomers in general don't like to talk about money. What to do?
-
I'm a Financial Adviser: This Is How You Can Minimize the Damage of Bad Market Timing at RetirementPoor investment returns early in retirement on top of withdrawals can quickly drain your savings. The ideal plan helps prevent having to sell assets at a loss.
-
'You Owe Me a Refund': Readers Report Challenging Their Attorneys' BillsThe article about lawyers billing clients for hours of work that AI did in seconds generated quite a response. One law firm even called a staff meeting.
-
Dow Rises 313 Points to Begin a Big Week: Stock Market TodayThe S&P 500 is within 50 points of crossing 7,000 for the first time, and Papa Dow is lurking just below its own new all-time high.
-
January Fed Meeting: Live Updates and CommentaryThe January Fed meeting is a key economic event, with Wall Street waiting to see what Fed Chair Powell & Co. will do about interest rates.
-
7 Questions to Help Kick Off an Estate Planning Talk With Your ParentsIt can be hard for aging parents to discuss estate plans — and for adult kids to broach the topic. Here are seven questions to get the conversation started
