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Trump named Musk to lead panel on government efficiency

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Tesla's autonomous vehicle testing lags behind rivals like

Waymo

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Legal liability and insurance pose challenges for

autonomous

cars

By Chris Kirkham and Rachael Levy

Nov 14 (Reuters) - As Tesla's electric-vehicle sales

have flattened this year, CEO Elon Musk has increasingly staked

the company's future on his vision for self-driving robotaxis,

despite the massive technological and regulatory obstacles in

delivering them.

Now Musk - as one of President-elect Donald Trump's biggest

backers - may have the influence to help break through those

regulatory roadblocks.

Tesla currently faces a diverse landscape of state

driverless-vehicle laws that Musk blasted in an Oct. 23 earnings

call, calling it "incredibly painful to do it state-by-state."

He signaled he would advocate for one federal approval process

if Trump won and followed through on a promise to name

Musk "efficiency czar."

"If there's a department of government efficiency," Musk

said, "I'll try to help make that happen."

On Tuesday, Trump tapped Musk and another ally to lead such

an entity, which is not a government agency. It remains unclear

how the organization will function.

Musk's sway is likely to extend beyond efficiency. The

billionaire, who gave at least $119 million to a pro-Trump group

during the campaign, is expected to influence the

president-elect's pick for the next Transportation Department

secretary, according to a person close to Musk and Trump's

transition planning. That department, which includes the

National Highway Traffic Safety Administration (NHTSA),

regulates automakers and could push through significant changes

to the self-driving rules at a national level.

But even if Musk secures favorable regulation, Tesla would

still face steep technological and legal hurdles in deploying

driverless vehicles, along with questions over how to insure

them, according to Reuters' interviews with nine regulatory and

legal experts and a review of U.S. state driverless-vehicle

laws.

Tesla and Musk did not respond to Reuters' requests for

comment.

At present, Tesla remains years behind rivals in California,

by far the carmaker's largest U.S. market and a primary testing

ground for the autonomous-vehicle industry. Other companies have

navigated California's regulatory maze and completed millions of

autonomous-vehicle testing miles under state oversight,

according to a Reuters review of state regulatory data.

If Musk can succeed in securing federal regulations or laws

that preempt state oversight, experts in autonomous-vehicle

regulation said, it could allow Tesla to sidestep regulations in

California.

Tesla has logged just 562 testing miles since 2016 and

hasn't filed autonomous-driving reports to California regulators

since 2019, state records show. Alphabet's Waymo, by

comparison, logged more than 13 million testing miles and

secured seven different regulatory approvals between 2014 and

2023, when it received approval to charge passengers for rides

in driverless robotaxis. Waymo is among just three companies

with California permits to commercially operate driverless

vehicles and the only one approved to operate a robotaxi fleet

anything like what Musk envisions.

Waymo declined to comment on Tesla's regulatory strategy or

its approach to autonomous driving.

Tesla currently has the lowest-level California permit,

which allows testing with human-driver oversight. Only six

companies have driverless-testing approvals. California data for

those firms shows each tested with a driver for a minimum of

three years, often for millions of miles, before securing

driverless-testing approvals. Amazon's ( AMZN ) Zoox, for

instance, logged more than 1.6 million miles over three years.

General Motors' ( GM ) Cruise racked up more than 2.1 million

miles over five years.

Cruise declined to comment. Zoox said it also has a separate

driverless "pilot" permit from California regulators that allows

the company to pick up passengers without charging fares.

"Tesla has that entire journey in front of them," said Phil

Koopman, a Carnegie Mellon University engineering professor and

autonomous-vehicle safety expert. He said Tesla's current "Full

Self-Driving" (FSD) system - which actually requires a human

driver paying strict attention - is "nowhere near ready to be a

robotaxi."

Musk says self-driving Teslas will be ready next year,

echoing unfulfilled promises dating back about a decade. He has

increasingly bet Tesla's future on robotaxis since this spring,

when Reuters reported the automaker had scrapped plans for a

mass-market affordable car for human drivers amid softening

electric-vehicle demand and rising competition from cheap

Chinese EVs.

He told investors last month at a Hollywood-style robotaxi

unveiling near Los Angeles that Tesla would deploy fully

autonomous versions of its Model 3 and Model Y next year in

Texas and California. He also unveiled a two-seat "Cybercab"

robotaxi he says will start production in 2026 and cost "roughly

$25,000." Tesla stock fell 9% the next day as some underwhelmed

investors said Musk's presentation lacked concrete product

details. Since the election, however, Tesla shares have jumped

more than 30%, adding nearly $200 billion in market value, as

investors expect friendlier autonomous-driving and

artificial-intelligence regulation.

'BILLIONS OF MILES'

Tesla has lobbied for electric vehicle subsidies and other

benefits over the years.

The company for years has also supported a federal standard

for autonomous driving in discussions with Congress and NHTSA,

but was unable to get one in place, in part because of a divided

Congress, said two people familiar with the company's strategy.

Tesla in 2018 signed a letter supporting a Senate bill that

would have preempted some state regulation of autonomous

vehicles, but the legislation never got a full Senate vote.

In recent months, Musk has emerged as a prominent member of

Trump's inner circle.

He spent election night at Trump's Florida Mar-a-Lago club

and has frequented the luxury compound since the former

president's Nov. 5 victory, according to sources and videos

posted by Republican operatives.

Musk has attended at least one meeting at Mar-a-Lago about

the appointment of a senior cabinet position, Treasury

secretary, according to a second person familiar with the

matter.

A Trump spokesperson did not answer questions about

autonomous driving regulations or Musk's influence but said "our

federal bureaucracy will certainly benefit from his ideas and

efficiency."

Under a Trump administration, NHTSA could design

accommodating autonomous-vehicle standards but a key question

would be whether the regulator could or would prevent states

from passing their own stricter rules, three legal and

regulatory experts told Reuters.

A Republican-controlled Congress also could enact a national

approval process that supersedes state laws. NHTSA has

traditionally regulated the design of vehicles while states

primarily regulate drivers and set traffic laws - a split that

isn't clear once the car itself becomes the driver. Bryant

Walker Smith, a University of South Carolina law professor who

focuses on autonomous driving, said NHTSA could interpret its

authority more broadly if it "was being directed to achieve a

certain political outcome."

Under Trump, NHTSA could clear the path for more novel

designs like that of the Cybercab, which Musk says will have no

steering wheel or pedals.

National autonomous-vehicle regulation is more important to

Tesla than its rivals because Tesla has a different business

model. Musk's strategy involves selling millions of vehicles

that can drive themselves anywhere on earth. Almost all other

competitors, including Waymo, operate robotaxi fleets in

limited, comprehensively mapped zones of specific cities.

Waymo and others build more expensive robotaxis that are

equipped with suites of redundant technologies and sensors,

including radar and lidar, which uses lasers to detect objects

and create three-dimensional images of a vehicle's surroundings.

Tesla relies solely on "computer vision," which seeks to use

cameras like humans use eyes, with artificial intelligence that

translates images into driving decisions.

Asked on a July earnings call how he would overcome

regulatory challenges, Musk said Tesla would have "billions of

miles" showing FSD is safer than a human driver and that

regulators would be "morally obligated to approve."

But Tesla so far has little to show regulators. The

California Department of Motor Vehicles told Reuters Tesla had

not sought driverless-testing or deployment permits required to

operate driverless vehicles on public roads. California would be

critical to any rollout of what Musk calls a Tesla "robotaxi

network," which he has said could offer rides in both Tesla- and

customer-owned taxis. About 37% of all Teslas on U.S. roads are

in California, according to industry data provider Experian

Automotive.

Waymo is now the only company with California approval to

charge passengers for rides in driverless taxis. It wasn't easy.

Waymo first secured a permit in 2014 to test with a safety

driver. It got a driverless-testing permit four years later, in

October 2018, after logging more than 2.2 million test miles. It

took three more years and 3.7 million more testing miles to

secure approval from the California DMV to commercially operate

autonomous vehicles - with a human driver onboard - in San

Francisco and parts of San Mateo County. Waymo logged another

7.4 million miles before winning approval in August 2023 to

charge customers for rides in driverless robotaxis in San

Francisco, state records show. Waymo also currently operates in

Los Angeles and Phoenix.

GM's Cruise also operated driverless-taxis in San Francisco

but had its permit suspended after an October 2023 incident

where a Cruise vehicle dragged a pedestrian who had been hit by

another car for 20 feet.

LESS REGULATION, MORE LEGAL RISK

Tesla faces different but still-difficult challenges in

less-regulated states including Texas, which has almost no

restrictions and specifically forbids cities from regulating

driverless vehicles.

But Tesla would face immense legal liability for crashes the

moment it claims its vehicles are fully autonomous. The

automaker has until now blamed Tesla drivers in defending itself

against lawsuits and regulatory investigations over accidents

involving FSD and Autopilot. Tesla argues it warns drivers to

pay attention because those systems aren't fully autonomous.

If Tesla felt comfortable deploying self-driving technology

in low-regulation states like Texas, then "presumably they would

be doing it," said Smith, the University of South Carolina law

professor. But "once you say there is no need for a human to pay

attention, then you're pointing the finger back at yourself"

when it comes to crash liability.

Insuring driverless Teslas would be another major challenge.

Individual consumers can't currently buy a fully autonomous

vehicle - and so no insurance for one exists, said Bob Passmore,

a vice president specializing in home and auto insurance for the

American Property Casualty Insurance Association, a trade group.

He said corporate autonomous vehicle operators currently get

insurance through commercial policies or through specialty

"surplus lines" policies for unusual cases.

Many state laws are similar to Texas, allowing registered

driverless vehicles mostly unfettered access to roads, according

to a Reuters review of the statutes. Others impose more

restrictions: Nevada requires driverless-vehicle firms to get a

testing certificate and use employees as safety drivers.

Kentucky and South Dakota require vehicles to be able to pull

safely off the road if they encounter problems. Fifteen of the

50 U.S. states have no laws specific to driverless-vehicles,

according to the Autonomous Vehicle Industry Association, a

trade group.

Light or nonexistent regulations could heighten the legal

risk because autonomous-vehicle companies couldn't argue they

complied with strict government safety standards, said three

experts in autonomous-driving law. California's tougher

regulations help protect companies securing approvals, which

could provide "powerful" evidence for a defense if permitted

firms get sued over crashes, said William Widen, a University of

Miami law professor specializing in autonomous-vehicle

liability.

"The lawyers would always rather have the blessing of

regulators," he said, because it provides evidence that the

company wasn't "behaving recklessly or negligently, and that

they complied with all applicable laws."