The preliminary evaluation centers on complaints that a front suspension component could detach, raising the risk of lost steering control and adding fresh scrutiny after earlier recalls for the same part.
Tesla extended its July selloff with a 1.5% intraday drop on the final trading day of the month, taking its cumulative decline to more than 27%, as the U.S. National Highway Traffic Safety Administration (NHTSA) (U.S. auto safety regulator) opened a preliminary evaluation into about 1.2 million Model 3 and Model Y vehicles over suspension-related complaints. The agency has logged 156 complaints involving possible detachment of the front lower lateral link, a component that helps maintain front-wheel alignment and steering geometry. NHTSA said the failure could cause loss of directional control, though no crashes, injuries or fatalities have been reported. The probe, opened on July 31, covers certain 2018 to 2020 Model 3 sedans and 2021 to 2023 Model Y SUVs. Tesla previously recalled about 2,800 Model 3 vehicles in 2021 and 422 vehicles in 2023 over similar lower lateral link issues. NHTSA also concluded a separate investigation in 2024 into older Model S and Model X suspension systems after finding low failure rates and no major safety concerns. Tesla had not issued a public response regarding the new investigation. The investigation lands as Tesla's business shows a split picture across regions and segments. In the United States, Cox Automotive estimated second-quarter 2026 battery electric vehicle sales at about 247,200 units, down 20.5% year over year, while Tesla's U.S. sales fell 13.1% to about 124,800 units. First-half performance was uneven, with Model Y sales up 8.8% but Model 3 down 34.3%, while Model S, Model X and Cybertruck also posted notable declines. At the same time, Tesla's software push gained traction. Global active Full Self-Driving (FSD) subscriptions reached about 1.48 million to 1.5 million in the second quarter, up 56% from a year earlier, and Tesla said more than 55% of new vehicle deliveries in North America carried an FSD subscription, a record attach rate. In Europe, registrations across the European Union, European Free Trade Association and the United Kingdom rose 54.6% year over year to 170,400 in the first half of 2026, with June registrations at 52,600, nearly 50% higher, while EU-only growth reached 75.4%. Tesla's global deliveries totaled 480,100 in the second quarter, up about 25% year over year and setting a quarterly record. Investors are now watching whether NHTSA advances the matter from a preliminary evaluation to an engineering analysis, a step that would signal deeper scrutiny and increase the likelihood of a broader recall. Analysts say the review may not quickly derail Tesla's European rebound or FSD momentum, but it could raise recall costs, add pressure on warranty reserves and test brand trust as investors continue to question the company's valuation and transition toward a broader "physical AI ecosystem."