NHTSA has launched a new investigation into Tesla, the latest in a series of regulatory probes that have dogged the company's autonomous and semi-autonomous driving systems. Tesla reported FY2025 revenues of $94.8B, down 2.9% year-over-year, while net margins have compressed to just 4.1% — a steep decline from the company's peak profitability years.
The phrase 'Wall Street might be missing the bigger story' suggests the market is treating this as an isolated compliance event rather than a symptom of deeper structural risk. With gross margins at 18.0% and diluted EPS of just $1.08, Tesla's valuation premium remains extraordinarily high relative to its current earnings power, leaving little cushion for negative regulatory catalysts.
The second-order concern is that recurring NHTSA probes can accelerate regulatory rulemaking around Full Self-Driving, potentially constraining Tesla's highest-margin software ambitions — the very growth vector the bull case relies on. If FSD monetization gets delayed or curtailed by federal action, the path to margin recovery narrows considerably.
The bull case rests on Tesla's energy business and robotaxi optionality still being largely unpriced by traditional auto multiples. The bear case is that a shrinking revenue base, compressed margins, and an accumulating regulatory record represent a convergence of risks that the stock's premium multiple does not reflect. Key things to watch: the scope of the NHTSA probe, any FSD-related consent decrees, and whether Tesla can stabilize revenue growth in the next earnings print.