Regulatory Scrutiny and Price Cuts: A Dual Challenge for Tesla

While Tesla's share price appears calm, significant pressures are building behind the scenes. The electric vehicle pioneer faces a dual challenge: escalating regulatory investigations in the United States targeting its core autonomous driving technology, and intensifying market competition in Europe forcing aggressive pricing strategies.

In response to softening demand and rising competition from manufacturers like China's BYD and Germany's Volkswagen, Tesla has launched a new offensive in Europe. The company introduced a "Standard" variant of its Model 3 on Friday.

Priced strategically at 37,970 euros in Germany, the vehicle now sits below the key psychological threshold of 40,000 euros. Market analysts interpret this move as a pragmatic adjustment to what they term an "affordability crisis" in the EV sector. The company's short-term focus appears to be shifting from protecting profit margins to stabilizing recently weak registration numbers, prioritizing sales volume.

Autonomous Driving System Under Intensified Review

A more pressing concern for investors emerged late Friday. The U.S. National Highway Traffic Safety Administration (NHTSA) confirmed a significant expansion of its ongoing probe into Tesla's "Full Self-Driving" (FSD) driver-assistance system.

The agency has now identified at least 80 incidents where vehicles operating in FSD mode are alleged to have violated traffic rules. These reported violations include running red lights and departing from travel lanes. This figure marks a notable increase from the 50 incidents cited last October.

Should investors sell immediately? Or is it worth buying Tesla?

For Tesla, this investigation represents more than a regulatory hurdle. The company's valuation is heavily tied to its bet on robotaxis and autonomous driving technology, with key milestones planned for 2026. Should regulators deem the system unsafe or mandate recalls, this ambitious timeline could be jeopardized. Tesla has been given a deadline of January 19, 2026, to submit detailed data to the NHTSA.

Institutional Investors Show Caution

Signs of wariness are also emerging among major institutional shareholders. ARK Invest, the fund led by long-term Tesla bull Cathie Wood, sold approximately 38,000 Tesla shares on Friday. The transaction was valued at roughly $17.2 million.

While portfolio rebalancing is part of the fund's standard strategy, the timing of this sale amidst heightened regulatory headlines suggests a deliberate effort to manage risk exposure. From a technical analysis perspective, the stock's current position also warrants caution. With a Relative Strength Index (RSI) reading of 73.7, the shares are considered overbought, increasing the likelihood of a near-term pullback. The stock currently trades at 390.55 euros, approximately 14.5% below its 52-week high.

Looking Ahead

The new trading week will see market participants watching for any official statement from Tesla regarding the NHTSA investigation. However, a more definitive medium-term test will come with the release of quarterly figures at the end of January 2026. Those results will reveal whether the new, lower price points have succeeded in supporting delivery volumes without excessively eroding the company's profitability.