Tesla Inc's advanced driver assistant software will not gain regulatory approval in 2022, Chief Executive Elon Musk said, signaling that the company is not yet able to satisfy authorities that its cars can be driven without someone behind the wheel.
Tesla 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, enabling cars to steer, accelerate and brake within their lanes without driver intervention.
However, Tesla says the cars still need to be driven with human oversight. A highly autonomous vehicle would require regulatory approval in California, for example.
On a call on Wednesday to discuss quarterly results, Musk said he expects to release upgraded FSD software 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 won't 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 technology is much safer than the average human driver.
"Musk is opening the possibility Tesla will have a more difficult path to approval for FSD given heightened NHTSA (National Highway Traffic Safety Administration) and other scrutiny," said Craig Irwin, an analyst at Roth Capital.
The California Department of Motor Vehicles (DMV) on Thursday said it "has an ongoing review of the intended design and technological capabilities of Tesla vehicles," without elaborating further.
The regulator previously said it is evaluating whether Tesla's self-driving tests require regulatory approval, following "videos showing a dangerous use of that technology" and federal investigations into Tesla vehicle crashes.
It had said Tesla's "full self-driving" beta requires human intervention and therefore is not subject to its regulations on autonomous vehicles.
Critics say Tesla was able to avoid state regulatory oversight by telling the DMV its FSD features do not make the cars autonomous.
"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.
However, some analysts say 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 Musk has said eventually would become "the most important source of profitability for Tesla."