Analysis-Musk pushes regulatory limits with Tesla’s Cybercab robotaxi service

SAN FRANCISCO, Sept 4 (Reuters) - Tesla's push to get Cybercab robotaxis onto the road is set to challenge regulatory boundaries as the electric-vehicle maker starts charging passengers for rides in its sleek two-seat vehicles, which have no steering wheel, pedals, or side mirrors.

Only hours after Tesla hosted a rollout event in downtown Austin, Texas, the National Highway Traffic Safety Administration announced it had begun an audit of roughly 1,000 Cybercab units to examine how Tesla concluded that the vehicles satisfy federal vehicle-safety requirements.

In the U.S., regulators restrict commercial rollout of vehicles that fail to meet decades-old federal safety criteria designed for human-driven cars and requiring manual controls. However, industry experts say ambiguous regulations and Elon Musk's history of aggressive litigation could make it possible for Tesla to push the Cybercab into widespread operation regardless.

As a crowd of enthusiasts and social media influencers gathered in downtown Austin, Tesla added Cybercabs to the robotaxi fleet that currently operates using its best-selling Model Y SUVs. The company said Cybercab rides are available to the general public, and executives outlined pricing arrangements.

The gold-hued Cybercab with its butterfly doors represents Musk's wager that the company's future rests on self-driving software and robotics. That gamble has lifted Tesla's market value to $1.4 trillion, exceeding the combined valuation of the world's biggest automakers.

In contrast to most other nations, which require regulatory pre-approval of new vehicle models and technologies, U.S. automakers can put vehicles on public roads by self-certifying that they conform to federal standards.

"I don’t think there is a reasonable interpretation that can be made to suggest that the Cybercab can comply with the Federal Motor Vehicle Safety Standards," said Michael Brooks, executive director of the Center for Auto Safety, a consumer advocacy group.

Though NHTSA is moving with unusual speed to revise vehicle-safety standards and is separately drafting new regulations to accommodate driverless vehicles, experts say those efforts will probably take longer to take effect than Musk's rollout promises imply.

Musk, however, is not known for waiting on regulators. "Tesla historically has tested limits and pushed boundaries on regulations," said Philip Koopman, an engineering professor at Carnegie Mellon University and autonomous-vehicle safety expert. "I fully expect Tesla to test the limits."

Koopman said Musk could devise a "creative interpretation" of vehicle regulation, assert that Cybercabs meet federal standards, and "flood the market" with them. "That could take NHTSA or state regulators years to resolve. Meanwhile, Tesla could be operating on public roads."

Tesla did not reply to requests seeking comment.

A CYBERCAB WITHOUT CONVENTIONAL CONTROLS

Tesla began manufacturing the Cybercab in April, with Musk pledging that output would increase "exponentially" later this year or next. At the vehicle's 2024 debut, Musk had also said the company would sell the cars for under $30,000.

Subsequently, Tesla started a restricted, paid robotaxi service in Texas and Florida using its top-selling Model Y SUVs. The Model Y robotaxi is self-driving, but retains the manual controls mandated by federal safety regulations and, in certain vehicles, has human backup drivers.

Experts have raised doubts about how effectively Teslas can drive autonomously. Tesla claims its Full Self-Driving software, a variant of which powers Cybercabs, is as much as ten times safer than a human driver, and the Austin service has had no fatal crashes. Yet Reuters interviews with several former Tesla employees who trained the company's self-driving software revealed it still had trouble with basic maneuvers.

"No public information about Tesla’s capabilities suggests that Tesla is anywhere close to being able to safely and reliably deploy an automated driving system over the wide range of conditions that would be required for a vehicle without conventional controls," said Bryant Walker Smith, a University of South Carolina law professor whose work focuses on autonomous-driving regulation.

A ROUTE TO PUBLIC ROADS

NHTSA has an exemption process that automakers may apply for when their vehicles fail to meet safety standards. The complication: the exemption restricts deployment to 2,500 vehicles per year.

Tesla's engineering chief, Lars Moravy, said on social media platform X earlier this year that the Cybercab would not face that cap, though he provided no specifics. NHTSA previously stated that Tesla had not sought the exemption.

That has led to speculation that Tesla, as Koopman suggested, is taking the route of self-certification.

The historical precedent is not encouraging: Amazon's Zoox, which is rolling out a vehicle that resembles a toaster oven on wheels, outfitted with two facing bench seats and no driver controls, attempted self-certification and did not succeed.

After Zoox certified its vehicle, NHTSA initiated an investigation that concluded with Zoox withdrawing the self-certification. Nevertheless, roughly one year later, in July, Zoox obtained the federal exemption enabling limited commercial deployment.

Three former senior NHTSA officials told Reuters prior to Thursday's event that any dispute between NHTSA and Tesla over Tesla's self-certification could end up in court. "It does happen from time to time and NHTSA, importantly, has not always won these cases," one of the former officials said.