Musk’s Robotaxi Pitch Just Backfired And Shareholders Are Suing

Tesla’s latest autonomous push is under fire after reported incidents sparked a lawsuit and market reaction

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Tesla and Elon Musk had hoped that the rollout of a long-awaited Robotaxi service in Austin, Texas, would mark a major step forward for the company, bringing fully autonomous driving technology to the public. Instead, the Robotaxi has landed Tesla in hot water. Both Musk and the company are now named in a lawsuit alleging they concealed the risks of self-driving systems and inflated the automaker’s valuation.

Read: This City Could Be Tesla’s Toughest Robotaxi Challenge Yet

The proposed class action, filed by a group of shareholders, claims that Tesla’s Robotaxi vehicles in Austin have been seen behaving erratically, speeding, hopping curbs, swerving into the wrong lane, braking unpredictably, and even letting passengers off in the middle of busy roads, according to The Economic Times.

Shareholders Say the Tech Isn’t Ready

According to the shareholders, Musk and Tesla have consistently overstated the effectiveness and prospects of the automaker’s autonomous driving technologies, boosting its stock price. The lawsuit also takes issue with Musk’s April 22 statement that Tesla was “laser-focused on bringing Robotaxi to Austin in June,” and that the service would deliver “scalable and safe deployment across diverse geographies and use cases.”

Where Musk Goes, Controversy Follows

The shareholders are accusing Tesla and Musk of securities fraud. Their filing argues that the Robotaxi program poses a “significant risk” to public safety and may violate traffic laws, opening the company up to tighter regulatory scrutiny. They also note that Tesla’s stock dipped around 6 percent following public reports of incidents involving the Robotaxi fleet.

Last week, Tesla expanded its Robotaxi service to a geofenced area of the San Francisco Bay Area. However, as Tesla does not have regulatory approval to operate completely autonomous vehicles in California, all vehicles in the local Robotaxi fleet have a human behind the wheel. So, in reality, it’s not a Robotaxi service at all, but rather a simple ride-hailing service.

Despite these hurdles, Musk remains characteristically confident. On Tesla’s earnings call in late July, he predicted that “half of the population of the US will be covered by Tesla’s Robotaxi by the end of the year,” suggesting that regulatory concerns and technical setbacks aren’t slowing down the company’s broader ambitions.