Tesla flags its cars are not ready to be approved as full autonomous this year

WASHINGTON -- Tesla’s advanced driver assistant software will not gain regulatory approval in 2022, CEO Elon Musk said in remarks which indicate the company is not yet able to satisfy authorities that its cars can be driven without someone behind the wheel.

The automaker sells a $15,000 software add-on called "Full Self-Driving" (FSD) which enables its vehicles to change lanes and park autonomously.

That complements its standard "Autopilot" feature which enables cars to steer, accelerate and brake within their lanes without driver intervention.

However, the cars still need to be driven with human oversight. A completely autonomous vehicle would require regulatory approval.

Musk told a post-earnings call on Wednesday that all FSD users in North America will get an upgraded version at the end of the year, adding that while its cars are not ready to have no one behind the wheel, drivers would rarely have to touch the controls.

"The car will be able to take you from your home to your work, your friend's house, the grocery store without you touching the wheel," he said.

"It's a separate matter as to will it have regulatory approval. It will not have regulatory approval at that time," he added.

Musk also said Tesla hopes to provide an update to FSD in 2023 to show regulators that the car is much safer than the average human.

"Musk is opening the possibility Tesla will have a more difficult path to approval for FSD given heightened NHTSA and other scrutiny," said Craig Irwin, an analyst at Roth Capital.

Auto safety regulators have long been at loggerheads with Tesla over its partially automated driving systems. Since 2016, the National Highway Traffic Safety Administration (NHTSA) has opened 38 special investigations into crashes involving Tesla vehicles that have resulted in 19 deaths, looking at whether the software was a factor.

"Translation: Tensions between NHTSA and Tesla will ramp at the end of the year and Tesla will move forward," said Gene Munster, a managing partner at venture capital firm Loup Ventures, which owns Tesla shares.

Tesla's naming of its software has also caused consternation, with the automaker accused by a California state transportation regulator of false advertising since the features do not provide full autonomous vehicle control.

Tesla's website says both technologies "require active driver supervision," with a "fully attentive" driver whose hands are on the wheel, "and do not make the vehicle autonomous."

Some analysts say, however, that Tesla's primary problem is not regulators but the software itself, given the complexity of autonomous driving.

"The impediment is the technology. It is not about approval of that technology," said Bryant Walker Smith, a law professor at the University of South Carolina.

Tesla has repeatedly missed self-imposed targets for its vehicles to achieve full self-driving capability - a function that Musk has said will eventually become "the most important source of profitability for Tesla."