US regulator targets Tesla on NDAs, over-the-air software updates

The U.S. National Highway Traffic Safety Administration sent a pair of letters to Tesla targeting the company’s use of non-disclosure agreements for owners who gain early access to its “full self-driving” software beta as well as its decision to use an over-the-air software update to fix an issue that regulators say should have been a recall.

The letters signal NHTSA’s increasing scrutiny of Tesla and its practices related to over-the-air software updates and automated driving features within its Autopilot advanced driver assistance system.

Tesla vehicles come standard with a driver assistance system branded as Autopilot. For an additional $10,000, owners can buy “full self-driving,” or FSD — software that CEO Elon Musk has repeatedly promised will one day deliver full autonomous driving capabilities.

FSD, which has steadily increased in price and added new functions, has been available as an option for years. However, Tesla vehicles are not self-driving. FSD includes the parking feature Summon as well as Navigate on Autopilot, an active guidance system that navigates a car from a highway on-ramp to off-ramp, including interchanges and making lane changes. The latest FSD beta is supposed to automate driving on highways and city streets.

However, this is still a Level 2 driver assistance system that requires the driver to pay attention, have their hands on the wheel and be able to take control at all times.

The first letter, dated October 12, asked Tesla to explain why the company didn’t issue a recall when it used a software update to correct how its Autopilot advanced driver assistance system detects emergency vehicles in low light conditions. In NHTSA’s view, using an over-the-air software update to repair anything related to vehicle safety should be a recall.

“As Tesla is aware, the Safety Act imposes an obligation on manufacturers of motor vehicles and motor vehicle equipment to initiate a recall by notifying NHTSA when they determine vehicles or equipment they produced contain defects related to motor vehicle safety or do not comply with an applicable motor vehicle safety standard,” the agency wrote.

NHTSA stated that a recall notice must be filed with the agency no more than five working days after the manufacturer knew or should have known of the safety defect or noncompliance.

“Any manufacturer issuing an over-the-air update that mitigates a defect that poses an unreasonable risk to motor vehicle safety is required to timely file an accompanying recall notice to NHTSA,” the letter continued.

The second letter, also dated October 12, addressed Tesla’s use of NDAs for its so-called FSD early access beta release program. Owners have already paid for FSD, but Tesla has required NDAs to access the beta software. Last month, Musk also instituted another requirement — a safety score that uses personal driving data to determine whether owners can access the latest beta version.

“Given that NHTSA relies on reports from consumers as an important source of information in evaluating potential safety defects, any agreement that may prevent or dissuade participants in the early access beta release program from reporting safety concerns to NHTSA is unacceptable,” the agency wrote in the letter.

“Moreover, even limitations on sharing certain information publicly adversely impacts NHTSA’s ability to obtain information relevant to safety. In order to ensure that non-disclosure agreements regarding the FSD early access beta release do not interfere with NHTSA’s ability to exercise its oversight responsibilities we are issuing the attached Special Order to Tesla.”

Musk indicated on Twitter this week that Tesla would drop the NDA requirement.

The agency, however, is seeking more information and said Tesla has until November 1 to respond to both requests.