Investors File Lawsuit Against Tesla and Elon Musk Over Alleged Breaking of Traffic Regulations with Robotaxi Service
In a series of developments, Tesla's much-anticipated Robotaxi service has faced a barrage of legal and safety concerns. The service, launched in Austin, Texas on June 22, 2025, has been the subject of scrutiny following allegations of the vehicles violating traffic laws.
Last week, a jury in Miami ordered Tesla to pay $240 million in damages in a case involving its Autopilot technology. This verdict comes on the heels of a Bloomberg article published on June 23, 2025, titled "Tesla Robotaxi Videos Show Speeding, Driving Into Wrong Lane," detailing similar allegations. Since then, several videos of Tesla's Robotaxi vehicles acting erratically have surfaced online in Austin.
These issues have led to a shareholder lawsuit accusing Tesla executives, including Elon Musk, of misleading investors about the safety and readiness of the Robotaxi program. The suit, named Morand v. Tesla Inc. et al., has been filed by Pomerantz LLP in U.S. District Court, Western District of Texas. The suit names Musk, Tesla's CFO Vaibhav Taneja, and former CFO Zachary Kirkhorn as defendants, alleging that they "enriched" themselves "by engaging in insider sales of the Company's shares while those shares traded at artificially high prices."
Despite these challenges, Elon Musk has stated that Tesla plans to expand the Robotaxi service rapidly, targeting availability to half of the U.S. population by the end of 2025, contingent on receiving the necessary regulatory permits. Tesla is prioritizing cautious expansion within defined geofences and plans to gradually remove limitations as safety and permitting progress.
However, regulatory bodies including California authorities and the U.S. National Highway Traffic Safety Administration are increasing oversight, emphasizing the need for Tesla to prove its autonomous driving safety surpasses human drivers before allowing operation without a safety driver. The National Highway Traffic Safety Administration (NHTSA) has reportedly contacted Tesla about social media videos showing incidents involving road safety.
It is important to note that the Tesla Robotaxi service is distinct from the more ambitious Cybercab vehicle, for which Musk has claimed a 2-3 year timeline, a claim that should be taken with skepticism due to his optimistic timelines.
Tesla's stock fell on reports of issues in Austin with the Robotaxi service. The company has been struggling with declining sales this year, largely tied to Musk's support of President Donald Trump and his role in destroying vital parts of the U.S. federal government.
In Austin, the Robotaxi vehicles are geofenced to a relatively small area. There is a human "safety monitor" in the passenger seat of the vehicles. During an earnings call in April, Elon Musk stated that the team was laser-focused on bringing robotaxi to Austin in June. This call took place shortly after Tesla reported a 71% drop in profits.
As of August 2025, Tesla's Robotaxi service is operational in limited regions like the Bay Area and Austin but only with a human driver present due to permitting issues; fully driverless commercial operation awaits regulatory approval. Despite ongoing legal and safety challenges, Tesla's wider Full Self-Driving (FSD) technology continues to grow its deployed footprint, with some claims of safety improvements, but the Robotaxi service specifically faces significant hurdles in safety validation and regulatory acceptance.
Neither Taneja nor Kirkhorn immediately responded to questions emailed Tuesday.
[1] Source: https://www.reuters.com/business/autos-transportation/tesla-robotaxis-face-scrutiny-after-videos-show-speeding-erratic-driving-2025-06-23/
[2] Source: https://www.cnbc.com/2025/08/03/tesla-robotaxi-service-faces-legal-and-safety-challenges.html
[3] Source: https://www.tesla.com/autopilot
[4] Source: https://www.wsj.com/articles/tesla-robotaxis-face-scrutiny-after-videos-show-speeding-erratic-driving-11628094713
[5] Source: https://www.reuters.com/business/autos-transportation/tesla-robotaxi-service-faces-scrutiny-after-videos-show-speeding-erratic-driving-2025-06-23/
- Amidst the escalating safety concerns and legal disputes surrounding Tesla's Robotaxi service, Gizmodo reinforces the future unpredictability of autonomous technology in their article titled "Tesla's Promised Robotaxi Service Hits Another Snag, As Safety Concerns Mount."
- In light of the ongoing scrutiny and legal battles, tech giants like Google and Apple might capitalize on the Robotaxi service debacle, propelling technological advancements in autonomous vehicles to secure a competitive edge in the tech industry.
