Tesla's Phantom Breaking Issue and Other Legal Troubles Are Burning It's Reputation to the Ground...

“Atleast, it’s not a flying hood…” Elon, probably

If you thought Tesla’s biggest controversy this year was the Cybertruck’s questionable design or the flying hood malfunction, think again. The EV giant is in hot water over a defect that sounds like something out of a friggin ‘ghost story—“phantom braking.”

(Source: Giphy) 

In short, on Friday,  a U.S. judge in Chicago told Tesla, “Nice try,” after the company attempted to get a proposed class-action lawsuit over the issue thrown out. The lawsuit, filed by plaintiffs Joshua Santiago and others, alleges that Tesla failed to inform buyers about a defect in its forward collision system that causes cars to slam on the brakes for absolutely no reason. You know, just casually stopping in the middle of the highway to avoid… nothing.

(Source: GuruFocus) 

Judge Georgia Alexakis, presiding over the case, ruled that while parts of the lawsuit could be trimmed, the core accusation—that Tesla knowingly concealed this safety defect—was strong enough to move forward. And honestly, Tesla’s lawyers probably left the courtroom feeling like their Autopilot just drove them into a ditch LOL. 

What’s interesting here is that the suit claims that Tesla’s forward collision monitoring system, a key feature of its much-hyped Autopilot, has been triggering false alarms since at least 2015. Instead of helping drivers avoid accidents, it allegedly causes the car to brake unexpectedly, sometimes even stopping completely. Think of it as your car deciding to play “red light, green light” without your consent.

(Source: Giphy) 

The plaintiffs also argue that Tesla was well aware of the issue but conveniently left it off the brochure—or in this case, its website—where most buyers make purchase decisions. Tesla, of course, denied knowing about the issue back in 2015. In fact, they argue they didn’t even know when one of the plaintiffs bought their Model 3 in 2021. Ok aaaand?

Now with that said, Tesla didn’t walk away completely empty-handed. Judge Alexakis dismissed parts of the lawsuit, including claims that Tesla’s “phantom braking” defect caused its in-house insurance arm to overcharge drivers on premiums. Essentially, the plaintiffs couldn’t convince the court that false collision warnings somehow spooked Tesla’s actuaries into jacking up rates. But don’t worry, that piece of the case could make a comeback if the plaintiffs file an amended complaint.

(Source: Giphy) 

The heart of the matter, however, remains very much horned up: Did Tesla deliberately withhold information about “phantom braking” from potential buyers? The judge says the plaintiffs have successfully “connected the dots” between Tesla’s online marketing and its alleged failure to disclose the defect. Translation: Tesla screwed AF. 

Meanwhile in the real world though, Tesla’s legal troubles coincide with an ongoing investigation by the National Highway Traffic Safety Administration (NHTSA) into the same issue. Back in 2022, the NHTSA opened a probe into 416,000 Model 3 and Model Y vehicles after receiving 354 complaints about unintended braking. The good news? No accidents or injuries have been reported so far. The bad news? Tesla’s reputation for being the golden child of EVs is getting body bagged–hard. 

(Source: AutoGuide) 

Why? Because at the core of this lawsuit is trust—or the lack thereof.  Tesla isn’t just a car company; it’s a brand that sells a vision of a fully autonomous, crash-free future. So when issues like “phantom braking” pop up, it doesn’t just hurt Tesla’s bottom line. It erodes the faith of the very people who are willing to shell out big bucks for their “cutting edge tech”.

(Source: Giphy) 

In the end, we are all aware of Tesla’s big plans for its autonomous driving tech, with products like the Cybercab (a steering wheel-less taxi) and the Robovan (self-driving public transport) in the works. But if it can’t convince the public—and a jury—that it’s serious about safety, Elons dreams (read: empty promises) might be in trouble. 

For now, this is an ongoing issue, but in the short-term, keep an eye on Tesla’s stock throughout the week. And expect some wild volatility because of it. In the meantime, enjoy your Sunday and as always, stay safe and stay frosty friends! Until next time…

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Stocks.News holds positions in Tesla as mentioned in the article.