Tesla's San Francisco robotaxi plans confuse regulators

Tesla Chief Executive Elon Musk teased investors in July with an update on robotaxis : After a small-scale test in Austin, Texas, the company would quickly expand self-driving taxis to markets like the San Francisco Bay Area, where it was “getting regulatory permission to launch.”

Musk posted on X earlier that month that Tesla would deploy robotaxis there “probably in a month or two.”

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But the reality of Tesla's plans in San Francisco didn't include self-driving taxis. The automaker hadn't applied for the necessary permits, a process that could take years of testing under state supervision. Instead, it planned pre-scheduled rides in human-driven vehicles only for passengers who received an invitation. And it would do so under a permit typically used for limousines that doesn't allow on-demand transportation service, according to state officials.

News of Tesla's robotaxi plans surprised and alarmed regulators, according to emails from California and federal officials and a Tesla public policy official obtained by Reuters through a public records request.

Following a media report that Tesla would deploy robotaxis in the Bay Area in late July, a senior state transportation official asked a Tesla official if the company would clear up the “public confusion.”

The Tesla representative didn't respond directly, stating only that the company doesn't respond to media inquiries and that customers would receive information as soon as it becomes available. The following month, Musk posted on X that "Tesla's Robo-Taxi service area is already larger than any competitor in Austin and the Bay Area."

Musk and Tesla did not respond to requests for comment on this story. A spokesperson for the California Public Utilities Commission, which regulates ride-hailing, said Tesla is required to describe its service “adequately and accurately” and ensure its communications “provide a clear distinction” between its human-driven operations in California and ride-hailing services offered elsewhere.

Tesla's unproven robotaxis underpin its $1 trillion-plus market value and the impressive compensation package the company's board has proposed to Musk, which offers him potentially hundreds of billions of dollars in stock tied to performance targets.

Musk has promised the imminent arrival of robotaxis every year for a decade. So far, however, the electric vehicle maker has only launched a small-scale test in Austin, with a limited number of passengers and human safety monitors in the front passenger seat.

On the July earnings call, Musk said Tesla had made "demonstrable progress" in autonomous driving "that many naysayers said we couldn't achieve."

"We did what we promised," he said. "It doesn't mean we always arrived on time, but we did. And our naysayers just sit there looking foolish."

Now, Musk's promises are getting bigger, as the billionaire faces a November shareholder vote on his compensation. Pressure to deliver robotaxis is also mounting, as Tesla's electric vehicle business is in decline. Musk told investors in July that robotaxis would expand at a "hyperexponential rate," serving "half the U.S. population" by the end of the year.

Meanwhile, as with the Bay Area episode, Musk and Tesla are increasingly using the term "robotaxis" to mean something less than a fully autonomous taxi. A September 13 post on the Tesla X account confused the term with the "Full Self-Driving" (FSD) driver-assistance feature offered to customers, which requires an attentive human driver.

“$99/month to have your own supervised robo-taxi,” the post said, citing the FSD subscription price.

Matthew Wansley, a professor at New York's Cardozo School of Law who specializes in autonomous vehicles, said Musk's Bay Area claims show how Tesla wants all the benefits of marketing "robotaxis" and "self-driving" to customers and investors, but none of the regulatory burdens or legal risks of making the same claims to the government.

“They don’t want to tell regulators they have a self-driving system,” he said, “because then they become subject to a lot more regulations in many states.”

Tesla launched its service in Austin in June, but hasn't yet opened it to the general public. The company has begun moving safety monitors from the passenger seat to the driver's seat on trips that include highways, Tesla announced on X.

Musk said Tesla plans short-term expansions in Florida, Nevada, and Arizona, which, like Texas, have few regulatory barriers for autonomous vehicles. Tesla obtained a certificate this month to test self-driving cars in Nevada, according to state officials, who did not respond to questions about whether the company has filed documentation to operate robotaxis.

Tesla received permission from Arizona on Friday to test autonomous vehicles with a safety driver, but is still awaiting approval to test and operate without drivers. Florida does not require specific operating permits.

Dan Crowley, portfolio manager at Tesla investor Nightview Capital, said it doesn't matter if the company meets all of Musk's notoriously optimistic deadlines, as long as it ultimately delivers a transformative product. Even then, he said, investors may eventually lose patience.

“If we were in the same place in two years, I wouldn’t be ecstatic.”

News of Tesla's robotaxi plans in the Bay Area has left regulators at the California Transportation Agency and the National Highway Traffic Safety Administration (NHTSA) uneasy, according to emails exchanged on July 25 seen by Reuters.

"Did your team meet with Tesla and discuss the launch this weekend?" NHTSA investigator Kareem Habib wrote to California authorities. A state official responded that Tesla lacked the necessary permits.

Emily Warren, the state's deputy transportation secretary, emailed Tesla's public policy official and senior officials at two other state agencies that oversee autonomous vehicles, citing concerns about public misconceptions about Tesla's plans in the Bay Area.

Tesla employee Noelani Derrickson said in an emailed response that the company informed the California Public Utilities Commission that it planned trips for family and friends of Tesla employees in non-self-driving vehicles.

Warren pressed Derrickson on how the information about a "robotaxis" service became public, suggesting it may have resulted from "a misinterpretation" of Tesla's recent statements to employees and the public. Warren asked, "Do you have any plans to publicly clarify the nature of Tesla's Bay Area expansion to dispel the confusion?"

Tesla's Derrickson did not respond directly, but said, "As a general policy, Tesla does not respond to inquiries from the press," adding that customers will receive information about Tesla's transportation operations "when it becomes available."