Tesla shares tumbled more than 5% on Tuesday as a new federal investigation into a fatal crash in Texas reignited concerns over the safety of the company's driver-assistance systems. The stock, which had opened higher on the back of strong European sales data, gave up all gains and then some after the National Highway Traffic Safety Administration (NHTSA) confirmed it had opened a special crash probe late Monday.
The investigation centers on a Tesla Model 3 that struck a home in Katy, Texas, killing 76-year-old Martha Avila. The driver, Michael Butler, told Harris County authorities that he had been using Tesla's partially automated driving features when the vehicle left its lane and crashed. Tesla executives pushed back publicly, with CEO Elon Musk calling the crash "nonsensical" on X and Vice President of Autopilot Ashok Elluswamy claiming the driver manually overrode the system by pressing the accelerator to 100%, reaching 73 mph in a residential area.
The probe adds a layer of legal and reputational risk to Tesla's self-driving ambitions, which remain a key part of its long-term valuation narrative. The stock, which had a 52-week range of $288.77 to $498.83, fell sharply as broader markets also struggled—the S&P 500 dropped 1% and the Nasdaq Composite declined 1.5% amid a tech sell-off.
Earlier in the session, positive news from Europe had briefly buoyed shares: Tesla's European registrations more than doubled year-over-year in May to 28,610 units across the EU, UK, and EFTA countries, marking the fourth consecutive month of growth in a region that had been a drag on sales. The broader battery-electric vehicle market in Europe grew 39% in May. Wall Street remains divided, with 21 Buy ratings, 19 Holds, and 5 Sells, and an average price target of $405.06. UBS raised its second-quarter delivery estimate to 405,000 vehicles, slightly above consensus, while noting that buyside expectations range from 400,000 to 420,000.
Despite the regulatory overhang, Tesla's upcoming delivery report and strength in its energy business—forecast to deploy 13.4 GWh of storage in Q2, up 40% year-over-year—offer potential positive catalysts. However, the immediate focus remained on the crash investigation, highlighting the tensions between improving operational metrics and the ongoing scrutiny of autonomous driving technology.
