Tesla's Major Controversies: What Investors Need to Know in 2025

Tesla continues to dominate headlines, but not always for positive reasons. The electric vehicle giant faces mounting controversies across autonomous driving safety, workplace culture, and regulatory scrutiny that investors cannot ignore.

Full Self-Driving Under Federal Investigation

The National Highway Traffic Safety Administration (NHTSA) launched a major investigation in October 2025 covering 2.88 million Tesla vehicles equipped with Full Self-Driving (FSD) technology. The probe stems from 58 safety violation reports where FSD allegedly caused vehicles to run red lights, drive on the wrong side of the road, and enter oncoming traffic lanes. Among these incidents, 14 resulted in crashes and 23 people were injured.

NHTSA's three-year study revealed at least 13 fatal crashes involving Tesla's Autopilot feature, with more than 40 special investigations since 2016 documenting 23 total deaths. Regulators identified a "critical safety gap" in Tesla's driver monitoring system, arguing it inadequately ensures drivers remain attentive while Autopilot operates.

Morgan Stanley downgraded Tesla stock in December 2025 despite raising its price target, citing execution risks around the camera-only approach to self-driving technology. Analysts expressed concern that Tesla must prove exceptionally high safety standards to gain regulatory approval, particularly in regions with adverse weather conditions.

Workplace Discrimination Lawsuits

Tesla's Fremont factory has become the center of one of the largest workplace discrimination cases in recent history. Approximately 6,000 current and former Black employees joined a class-action lawsuit, with numbers expected to exceed 10,000 participants. More than 200 Black workers submitted declarations, with roughly two-thirds reporting they witnessed nooses, racist graffiti, or swastikas at the factory.

"Tesla's toxic workplace culture has caused financial harm and irreparable damage to the company's reputation."

In 2024, a jury awarded former employee Owen Diaz $3.2 million after finding Tesla failed to address racial harassment. California's Civil Rights Department filed a separate lawsuit in 2022 alleging Black workers received lower wages, were denied promotions, and faced routine racial discrimination compared to white colleagues.

Seventeen long-term investors holding millions of Tesla shares wrote to the board in 2023 expressing concerns that the company's workplace culture posed substantial legal, operational, and reputational risks. Research shows companies with poor workplace equity practices are linked to lower investment returns.

Stock Volatility from Political Entanglements

Tesla's stock experienced dramatic swings in 2025 tied to CEO Elon Musk's political activities. Shares plunged 14% in a single day in June, erasing $150 billion in market value during a public feud between Musk and President Trump. Investor confidence appeared shaken as those who bet on favorable regulatory treatment questioned whether political connections remained an asset.

The stock had surged over $450 billion in value following Trump's November 2024 election victory, with investors anticipating reduced regulatory oversight. However, shares retreated from their December 17 all-time high as Musk's involvement with government cost-cutting initiatives sparked consumer boycotts and reputation damage.

In July 2025, shares fell nearly 8% after Musk announced plans to launch a new political party, reigniting concerns about his commitment to Tesla's business operations amid declining sales. An investor group demanded Musk spend a minimum of 40 hours per week at Tesla, highlighting board oversight concerns.

Legal and Regulatory Challenges

Musk settled securities fraud charges with the SEC in 2018, stepping down as Tesla's board chairman and paying financial penalties. In August 2025, federal judges in California and Maryland approved class-action lawsuits alleging Musk made false statements about Tesla's self-driving capabilities as early as 2016, claiming all vehicles had necessary hardware for full autonomy.

Tesla also faced multiple recalls in 2025, including 376,000 Model 3 and Model Y vehicles for steering software defects. While resolved through remote software updates, these incidents amplified debates about vehicle reliability and over-reliance on software systems.

Acts of vandalism targeting Tesla vehicles, dealerships, and charging stations increased across the U.S., Canada, and Europe in 2025 as protests against Musk's actions grew more visible.

Investment Implications

The convergence of safety investigations, workplace lawsuits, political volatility, and regulatory scrutiny creates meaningful risks for Tesla investors. While the company's stock has demonstrated resilience with gains exceeding 70% over six months through October 2025, near-term volatility appears likely as regulators scrutinize safety concerns and litigation progresses.

Investors should monitor NHTSA investigation outcomes, workplace discrimination case developments, and whether Tesla's camera-only autonomous driving approach gains regulatory acceptance. The board's ability to ensure management focus and address corporate governance concerns also warrants attention given the documented correlation between strong workplace culture and superior long-term financial performance.