Investor Ross Gerber reported on July 31, 2026, that Tesla Inc.'s (NASDAQ: TSLA) Full Self-Driving (FSD) system nearly caused an accident while passing emergency vehicles, stating the technology "still has major issues." The incident occurred during a single ride where the vehicle twice slammed on its brakes as emergency vehicles with lights on passed quickly, raising safety concerns for shareholders and regulators monitoring autonomous driving progress.

Gerber, co-founder of Gerber Kawasaki, detailed the malfunction in a post on the social media platform X. He noted that previous versions of the FSD software struggled to differentiate between a fire truck and a dump truck. During his drive home, the car's aggressive braking response to emergency vehicles created a hazardous situation. "This is no good," Gerber wrote, emphasizing that the system's inability to correctly identify first-responder vehicles remains a critical flaw.

Regulatory and Political Context

The investor's criticism aligns with broader regulatory scrutiny of autonomous vehicles. National Highway Traffic Safety Administration (NHTSA) Administrator Jonathan Morrison had previously criticized autonomous vehicle companies for interfering with first-responder operations. Morrison demanded that AV manufacturers remedy these interference issues, highlighting a pattern of safety risks associated with current autonomous technologies.

Meanwhile, the political landscape for autonomous vehicles is shifting. The Donald Trump administration recently introduced an updated approach to self-driving regulations in the U.S. The Sean Duffy-led Department of Transportation (DOT) proposed measures aimed at accelerating the adoption and development of autonomous vehicles. These proposals include directing the NHTSA to grant temporary exemptions to companies like Zoox, signaling a push for faster deployment despite safety concerns.

Strategic Speculation on Tesla

Gerber's comments come amid reports that Tesla may be considering selling its Chinese business to facilitate a potential merger with Space Exploration Technologies Corp. (NASDAQ: SPCX). Although Elon Musk dismissed these reports as "absurdly fake news," Gerber suggested an alternative strategic move. He proposed that Tesla could sell its robots and robotaxi units to SpaceX, allowing Tesla to refocus solely on electric vehicle manufacturing.

Market Performance

Tesla shares were up 1.12% to $314.69 during overnight trading following the news. According to Benzinga Edge Rankings, Tesla scores poorly on Momentum and Value metrics but provides satisfactory Growth and Quality scores. The stock fails to show a favorable price trend across short, medium, and long-term horizons.

What the Numbers Show

The divergence between Tesla's satisfactory Growth and Quality scores versus its poor Momentum and Value ratings suggests investors are cautious about near-term valuation despite long-term potential. The recent negative commentary from a prominent investor like Gerber, combined with regulatory pressure from the NHTSA, adds headwind to the stock's momentum. While the DOT's pro-automation stance provides a tailwind for industry growth, specific safety incidents involving FSD remain a material risk factor for Tesla's autonomous driving timeline.

Gerber Kawasaki CEO Ross Gerber proposed on July 31, 2026, that Tesla Inc. could resolve its China operational challenges by selling its robotics and autonomous vehicle units to Space Exploration Technologies Corp. Gerber’s suggestion emerged after a Wall Street Journal report alleged Tesla was weighing the sale of its Chinese business to facilitate a potential merger with SpaceX. Tesla CEO Elon Musk immediately dismissed the report as "absurdly fake news," stating the separation had never been discussed internally. Despite the denial, Gerber argued that offloading non-EV assets would allow Tesla to remain an electric vehicle company while addressing geopolitical sensitivities surrounding its Shanghai Gigafactory.

The Wall Street Journal cited anonymous sources claiming Tesla executives were preparing for a potential spinoff, closure, or sale of its China unit. Musk rejected these claims on social media, emphasizing that the Chinese operation remains integral to Tesla’s strategy. The Shanghai Gigafactory is Tesla’s largest manufacturing facility, supplying vehicles to domestic buyers and serving as an export hub for Europe, Canada, and Asia-Pacific. Tesla sources more than 95% of components for its Model 3 and Model Y vehicles locally in China, reinforcing the region’s strategic importance despite growing competition from domestic rivals like BYD.

Analyst Perspective on Structural Risks

Gerber highlighted that the "Tesla China issue" poses ongoing risks due to geopolitical tensions. He suggested that transferring autonomous driving and robotics ambitions to SpaceX might mitigate regulatory headwinds. This perspective aligns with broader market speculation about a Tesla-SpaceX merger, which Musk has not ruled out, noting the companies’ businesses are becoming increasingly interconnected. However, such a merger faces significant hurdles given SpaceX’s role as a major U.S. defense contractor with national security implications.

SpaceX recently completed its initial public offering on June 12, pricing shares at $135 per share and raising $75 billion, valuing the company at roughly $1.75 trillion. The stock surged to $225.64 before slipping below its IPO price by July 23, generating estimated paper gains of $15.5 billion for short sellers. SpaceX is scheduled to report its first earnings as a public company on Tuesday, with analysts projecting revenue between $6.8 billion and $8 billion. Full-year revenue estimates stand at $39.1 billion, climbing to $73.1 billion next year, driven largely by data center deals with Anthropic, Reflection AI, and Alphabet Inc.

Regulatory Pressures on Robotics

Beyond merger speculation, Tesla faces external regulatory pressures involving its robotics division. The Federal Communications Commission imposed a ban on foreign humanoid robots entering the U.S. market over security concerns. Beijing criticized this move, warning it could harm trade relations and threatening retaliatory measures, including restrictions on rare earth mineral supplies. These tensions could disrupt Tesla’s Optimus humanoid robot production in California, which relies on global supply chains. During its second-quarter earnings call, Tesla confirmed it is installing first-generation Optimus production lines ahead of planned manufacturing in 2026.

What the Numbers Show

The divergence between Musk’s denial of any sale discussions and Gerber’s structural proposal highlights investor sensitivity to geopolitical risks in China. While Tesla’s operational integration in China remains strong—with high local sourcing rates and export volumes—the potential for regulatory retaliation creates uncertainty. The immediate market reaction to Musk’s denial saw Tesla shares rise 1.90% to $314.72, suggesting investors viewed the clarification as stabilizing. However, the lack of a definitive long-term strategy for managing U.S.-China tech tensions leaves the company exposed to future policy shifts, particularly regarding its robotics and autonomous vehicle ambitions.