Tesla Faces Regulatory Scrutiny Over Model 3 Safety Feature

Tesla shares, trading near record highs, are navigating fresh regulatory attention. Just before the Christmas holiday, U.S. safety regulators initiated an investigation into approximately 179,000 Model 3 vehicles from the 2022 model year. The probe by the National Highway Traffic Safety Administration (NHTSA) centers on concerns that the mechanical door release mechanisms in these electric sedans may be difficult to locate or operate during an emergency. This inquiry was reportedly prompted by a vehicle fire incident where the issue became relevant.

Despite this development, Tesla's equity demonstrated resilience on the shortened trading session of Christmas Eve, closing at $485.40 per share.

Investor sentiment appears largely unfazed for now. The stock continues to hold well above the $480 level, consolidating following a significant rally throughout December. Tesla's market capitalization stands at approximately $1.61 trillion, underscoring its dominant and unparalleled position within the electric vehicle sector. This valuation exceeds the combined market value of most legacy automakers, reflecting sustained market confidence in the company's growth trajectory despite periodic regulatory challenges.

The stock's 52-week range highlights a remarkable year, with the high at $498.83 and the low at $214.25.

Should investors sell immediately? Or is it worth buying Tesla?

Details of the Safety Investigation

The NHTSA's Office of Defects Investigation is reviewing complaints alleging that the emergency door release in certain Model 3 vehicles is not intuitively placed and could be challenging to use. In critical situations, such as a fire, this could pose a serious safety risk. The agency is now evaluating whether a formal recall campaign will be necessary. While regulatory procedures are familiar territory for Tesla, the market is watching the potential scope and speed of the agency's response.

Strategic Moves and Near-Term Technical Outlook

In a separate end-of-year business move, Tesla introduced new leasing terms for its Model S sedan. Market observers interpret this as a strategic effort to stimulate demand in the higher-margin luxury vehicle segment.

The immediate focus for traders is the $485 support level as markets reopen after the holiday period. The stock's near-term direction is likely to be influenced by the NHTSA investigation's outcome. If the probe remains limited to the current vehicle scope and does not escalate into a large-scale recall, the prevailing upward trend could resume, with the psychologically significant $500 mark becoming the next target. Conversely, should regulators broaden the investigation or mandate a significant corrective action, a correction toward the $470 level could materialize.