Is Tesla's Cybercab Certification Facing a Regulatory Roadblock?

Key Takeaways Tesla, Inc. (TSLA Quick QuoteTSLA - Free Report) faces a regulatory probe after the U.S. National Highway Traffic Safety Administration (NHTSA) opened an investigation into the certification of nearly 1,000 Cybercabs, raising questions about how the driverless vehicles meet federal safety standards.The inquiry comes as Tesla begins commercial deployment of a limited number of two-seat Cybercabs in Austin, TX. The company plans to gradually expand the service by adding more vehicles and eventually bringing the robotaxis to other markets.At the heart of the investigation is how Tesla certified a vehicle designed to operate without a human driver despite lacking conventional controls found in traditional road vehicles.The Cybercab lacks a permanently attached steering wheel, brake pedal, accelerator pedal or conventional mirrors. NHTSA is reviewing the process and technical information Tesla used to certify the vehicles as compliant with federal motor vehicle safety standards. The agency will also examine how Tesla determined that certain standards did not apply to the Cybercab.Tesla did not immediately respond to requests for comment.The investigation comes as Tesla seeks to make the Cybercab the foundation of a larger robotaxi business, while regulations governing vehicles without traditional human controls continue to evolve.Under current rules, manufacturers generally self-certify compliance with the Federal Motor Vehicle Safety Standards. However, the Cybercab's unconventional design creates additional challenges because many existing standards were developed for vehicles operated by a person seated behind a steering wheel.NHTSA has been considering changes to accommodate autonomous vehicles. In June, the agency proposed eliminating the requirement for conventional manual brake pedals in certain self-driving vehicles and has been evaluating other regulatory changes that could enable autonomous vehicles to operate without equipment designed for human drivers.The Cybercab probe is notable because regulators are working toward rules that could make vehicles with such designs easier to deploy, while Tesla has already applied its interpretation of the existing framework. TSLA carries a Zacks Rank #4 (Sell) at present. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Updates on Autonomous Driving Efforts by Other Automakers In March, Lucid Group, Inc. (LCID Quick QuoteLCID - Free Report) unveiled its robotaxi concept, the Lucid Lunar, a two-seat vehicle designed without a steering wheel or pedals. The company is also nearing an agreement with Uber Technologies, Inc. UBER to develop a robotaxi based on an upcoming midsize Lucid model. Meanwhile, Lucid is partnering with autonomous driving firm Nuro to develop a self-driving version of its Gravity SUV, which is expected to join Uber's network in the San Francisco area by the end of this year.Rivian Automotive, Inc. (RIVN Quick QuoteRIVN - Free Report) is also expanding its presence in the autonomous ride-hailing market through a partnership with Uber. In March, Uber announced plans to invest up to $1.25 billion in Rivian as part of an agreement to deploy as many as 50,000 Rivian robotaxis across multiple countries by 2031. The deal includes an initial $300 million investment, subject to regulatory approval. Rivian and Uber expect the R2-based robotaxis to operate exclusively through Uber's ride-hailing and delivery platform across 25 cities in the United States, Canada and Europe, with San Francisco and Miami targeted as the first markets in 2028. Tesla's Price Performance, Valuation and Estimates Tesla has underperformed the Zacks Automotive – Domestic industry in the last six months. Tesla has lost 11.2% compared with the industry's decline of 5.8%. Image Source: Zacks Investment Research From a valuation perspective, Tesla appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 12.24, higher than the industry's 3.24. Image Source: Zacks Investment Research The Zacks Consensus Estimate for 2026 and 2027 EPS has moved down 31 cents and 26 cents, respectively, in the past 60 days. Image Source: Zacks Investment Research