In recent news, as Tesla’s electric vehicle sales have stabilized this year, its CEO Elon Musk is increasingly focusing on the company’s vision for his robotaxi service, despite facing various technological and regulatory obstacles in terms of delivery.
One of the challenges Tesla currently faces is the different state laws regarding autonomous driving vehicles in the United States. Musk criticized this issue during an October 23 earnings call, stating that dealing with it on a state-by-state basis is very painful. He mentioned that if Trump wins the election, he would advocate for a federal approval process.
According to Reuters interviews with regulatory and legal experts, as well as a review of autonomous vehicle laws in the U.S. states, Tesla will encounter significant technical and legal obstacles in deploying autonomous driving vehicles, along with potential issues regarding insurance coverage.
Currently, Tesla lags behind its competitors in California by several years, where it’s the largest market and a primary testing ground for the autonomous driving car industry. Review of California’s regulatory data by Reuters indicates that other companies have navigated the state’s complex regulatory maze and successfully completed millions of miles of autonomous driving car tests under California regulations.
Experts in the autonomous driving car regulatory field suggest that if Musk can successfully establish federal regulations or laws that supersede state regulations, Tesla could bypass California’s regulations.
Records in California show that since 2016, Tesla has only tested 562 miles of mileage and hasn’t submitted autonomous driving reports to California regulators since 2019. In contrast, Alphabet’s Waymo accumulated over 13 million miles of testing from 2014 to 2023 and received seven different regulatory approvals, including approval in 2023 to charge passengers riding in unmanned robotaxi vehicles. Waymo is one of the three companies permitted for commercial operation of autonomous driving vehicles in California and the only one approved to operate a robotaxi fleet similar to Musk’s envisioned service.
Tesla currently holds the lowest-level permit in California, allowing testing under human supervision. Only six companies have received permits for driverless testing. California data shows that before obtaining driverless testing permits, each company conducted at least three years of driver-assisted testing, often covering millions of miles. For example, Amazon’s Zoox drove over 1.6 million miles in three years, while General Motors’ Cruise accumulated over 2.1 million miles in five years.
Phil Koopman, an engineering professor at Carnegie Mellon University and an expert in autonomous driving vehicle safety, stated that Tesla still has a long way to go. He believes that based on Tesla’s current “Full Self-Driving” (FSD) system, it’s far from ready to become a robotaxi.
Musk claims that Tesla’s autonomous driving cars will be ready next year. Since spring this year, he has increasingly bet Tesla’s future on robotaxis. Reuters reported that due to weak demand for electric vehicles and increasing competition from low-cost Chinese electric cars, Tesla has essentially abandoned plans to produce budget cars for human drivers.
Last month, Musk held a Hollywood-style robotaxi unveiling near Los Angeles and informed investors that Tesla would deploy full self-driving versions of Model 3 and Model Y in Texas and California next year. He also introduced a two-seater car called “Cybercab” for use as a robotaxi, stating that production of this taxi would begin in 2026 with a price of “approximately $25,000”.
However, Tesla’s stock fell by 9% the following day, with some investors criticizing Musk’s speech for lacking specific product details. Nevertheless, since the election, Tesla’s stock has risen by over 30%, increasing its market value by nearly $200 billion, as investors anticipate friendlier government regulations on its autonomous driving and artificial intelligence.
Three individuals familiar with the company’s strategy mentioned that Tesla has long supported establishing federal standards for autonomous driving in discussions with Congress and the National Highway Traffic Safety Administration (NHTSA), but has not been successful.
Tesla signed a letter in 2018 supporting a Senate bill that would prioritize federal regulations over state regulations for autonomous driving cars, but the legislation never went for a full vote in the Senate. In recent months, Musk has become a key member of Trump’s inner circle and has been appointed by the elected president to lead a new “Department of Government Efficiency”.
Recently, a Trump spokesperson stated that “our federal bureaucracies would certainly benefit from his (referring to Musk) ideas and efficiency.” Three legal and regulatory experts told Reuters that under the Trump administration’s leadership, the National Highway Traffic Safety Administration could establish federal standards to accommodate autonomous driving vehicles.
A Republican-controlled Congress could establish a national approval process to replace state laws. Traditionally, the National Highway Traffic Safety Administration is responsible for regulating vehicle design, while states primarily oversee drivers and traffic regulations. However, once the vehicle itself becomes the driver, this division of labor becomes less clear.
Federal autonomous driving vehicle regulations are crucial for Tesla, as it has a business model different from its competitors. Musk’s strategy is to sell millions of cars capable of fully autonomous driving anywhere on Earth, unlike almost all other competitors including Waymo, which operate robotaxi fleets in limited, fully mapped areas of specific cities.
Waymo and other companies produce more expensive robotaxi vehicles equipped with redundant technologies and sensors, including radar and LiDAR, which use lasers to detect objects and create a 3D image of the vehicle’s surroundings. In contrast, Tesla relies solely on “computer vision”, attempting to mimic human eyes with cameras and using artificial intelligence to translate images into driving decisions.
During an earnings call in July, when asked how to overcome regulatory challenges, Musk stated that Tesla would prove the safety of “Full Self-Driving” (FSD) over human drivers by driving “billions of miles” and that regulatory agencies have a “moral responsibility to approve it”.
So far, Tesla has not submitted its design to regulatory agencies.
The California Department of Motor Vehicles (DMV) informed Reuters that Tesla has not applied for the necessary driverless testing or deployment permits for operating driverless cars on public roads. Obtaining California’s approval is crucial for Musk’s vision of a Tesla “robotaxi network”, where he mentioned the network would offer ride services with Tesla rental cars and customer-owned vehicles. According to industry data provider Experian Automotive, about 37% of Teslas driving on U.S. roads are in California.
Waymo is currently the only company approved in California to charge fares for rides in driverless robotaxi vehicles, which is no easy feat.
Waymo obtained its first safety driver testing permit in 2014. Four years later, in October 2018, after accumulating over 2.2 million testing miles, Waymo received a driverless testing permit. After another three years, adding 3.7 million miles to its testing mileage, Waymo finally obtained approval from the California DMV to conduct commercial autonomous driving car operations in select areas of San Francisco and San Mateo County with a human driver onboard. California records show that Waymo drove an additional 7.4 million miles before receiving approval in August 2023 to charge customers for rides in driverless robotaxi vehicles in San Francisco. Waymo currently operates in Los Angeles and Phoenix as well.
General Motors’ Cruise also operated driverless robotaxi vehicles in San Francisco but had its permits suspended in October 2023 after an incident where a Cruise vehicle dragged a pedestrian hit by another car for 20 feet.
In states with less regulation, Tesla faces different but still daunting legal challenges. For instance, in Texas, where there are minimal restrictions and explicit bans on cities regulating driverless vehicles, once Tesla claims its vehicles are fully autonomous, it will face significant legal liability in the event of accidents. Thus far, Tesla has been defending accidents involving the FSD system and Autopilot system, arguing that drivers are responsible for accidents and reminding them that these systems are not completely autonomous.
Securing insurance for Tesla’s driverless cars will also be a major challenge. Bob Passmore, Vice President of the American Property Casualty Insurance Association (APCIA), stated that individual consumers currently cannot purchase insurance for fully autonomous vehicles as there are no corresponding policies. He mentioned that commercial operators of autonomous driving cars can currently only obtain insurance through commercial policies or special “surplus lines” policies for specific circumstances.
According to Reuters’ regulatory review, many states have laws similar to Texas, allowing registered driverless vehicles to enter roads with minimal restrictions. Other states impose more limitations: Nevada requires driverless vehicle companies to obtain testing certificates and use employees as safety drivers. Kentucky and South Dakota mandate that vehicles can safely drive off the road in case of issues.
The industry organization, Autonomous Vehicle Industry Association, stated that out of the 50 states in the U.S., 15 states do not have specific laws for driverless vehicles.
Three experts in the autonomous driving legal field stated that lax regulations or a lack thereof could increase legal risks, as autonomous driving car companies would be unable to claim compliance with stringent government safety standards.
William Widen, a law professor at the University of Miami specializing in autonomous driving car liability issues, mentioned that California’s stricter regulations help protect approved companies. These regulations can provide “strong” evidence for defense when approved companies face lawsuits due to accidents.
He stated, “Lawyers always want to see regulatory agencies’ approval” to demonstrate that companies have not acted recklessly or negligently but followed all applicable laws.