WASHINGTON (Reuters) -Tesla Inc will recall more than 362,000 U.S. vehicles to update its Full Self-Driving (FSD) Beta software after U.S. regulators said on Thursday the driver assistance system did not adequately adhere to traffic safety laws and could cause crashes.
The National Highway Traffic Safety Administration (NHTSA) said the Tesla software allows a vehicle to "exceed speed limits or travel through intersections in an unlawful or unpredictable manner increases the risk of a crash."
Tesla said it disagreed with NHTSA's analysis but ultimately acquiesced to the safety agency's January request. The electric vehicle manufacturer has previously clashed with NHTSA, which has a number of pending Tesla probes, over other safety issues and recall demands.
Tesla, whose shares closed down 5.7% at $202.04, will release an over-the-air (OTA) software update free of charge. The EV maker said it is not aware of any injuries or deaths that may be related to the recall issue. The automaker said it had 18 warranty claims.
The recall covers 2016-2023 Model S and Model X vehicles, 2017-2023 Model 3, and 2020-2023 Model Y vehicles equipped with FSD Beta software or pending installation.
U.S. senators Ed Markey and Richard Blumenthal, both Democrats, said the recall was "long overdue," adding, "Tesla must finally stop overstating the real capabilities of its vehicles."
This is a fresh setback for Tesla's driver assistance system. Chief Executive Elon Musk has repeatedly missed his own targets to achieve self-driving capability, which he has touted as a potential cash cow.
The move is a rare intervention by federal regulators in a real-world testing program that the company sees as crucial to the development of cars that can drive themselves.
The recall comes less than two weeks before the company's March 1 investor day, during which Musk is expected to promote the EV maker's artificial intelligence capability and plans to expand its vehicle lineup.
While Tesla's Autopilot feature assists with steering, accelerating and braking for other vehicles and pedestrians within its lane, the company says FSD is a more advanced system “designed to provide more active guidance and assisted driving” under active supervision of the driver.
Tesla reported having $2.9 billion in deferred revenue at the end of 2022 related to "access to our FSD features, internet connectivity, free Supercharging programs and over-the-air software updates primarily on automotive sales."
Tesla could not be reached for comment, but Musk tweeted on Thursday that the word "recall" for an over-the-air software update is "anachronistic and just flat wrong!"
Tesla released FSD Beta to nearly all of its 400,000 FSD customers in the United States and Canada in the fourth quarter, when it recognized FSD revenue of $324 million. It said it expects to recognize nearly $1 billion of deferred revenue that remains over time as software updates are delivered.
Musk has positioned FSD technology as one of several artificial intelligence initiatives at Tesla.
Last May, in an interview with members of a Tesla owners club, Musk called full self driving "essential" for the company. "It’s really the difference between Tesla being worth a lot of money or worth basically zero."
NHTSA has an ongoing investigation it opened in 2021 into 830,000 Tesla vehicles with driver assistance system Autopilot over a string of crashes with parked emergency vehicles. NHTSA is reviewing whether Tesla vehicles adequately ensure drivers are paying attention. NHTSA said on Thursday despite the FSD recall its "investigation into Tesla’s Autopilot and associated vehicle systems remains open and active."
Tesla said in "certain rare circumstances ... the feature could potentially infringe upon local traffic laws or customs while executing certain driving maneuvers."
Possible situations where the problem could occur include traveling or turning through certain intersections during a yellow traffic light and making a lane change out of certain turn-only lanes to continue traveling straight, NHTSA said.
NHTSA said "the system may respond insufficiently to changes in posted speed limits or not adequately account for the driver's adjustment of the vehicle's speed to exceed posted speed limits."
Last year, Tesla recalled nearly 54,000 U.S. vehicles with FSD Beta software that may allow some models to conduct "rolling stops" and not come to a complete stop at some intersections, posing a safety risk, NHTSA said.
Tesla and NHTSA say FSD's advanced driving features do not make the cars autonomous and require drivers to pay attention.
In December, NHTSA opened two new special investigations into crashes involving Tesla vehicles, including an eight-vehicle crash in San Francisco on the Bay Bridge in which a driver reported the FSD feature had malfunctioned.
Since 2016, NHTSA has opened more than three dozen investigations involving Tesla crashes where advanced driver assistance systems were suspected of use and 19 deaths were reported.
(Reporting by David Shepardson in WashingtonAdditional reporting by Joseph White in Detroit and Hyun Joo Jin in San FranciscoEditing by Ben Klayman, Peter Henderson and Matthew Lewis)