Tesla contract won't be extented says Mobileye

A widening rift between electric vehicle maker Tesla Motors Inc and Mobileye NV sent shares of the Israeli maker of driving-assistance chips and software plunging on Tuesday.

Mobileye shares, which have been wildly popular with institutional and tech investors, were down 12.6 percent to $43.09 at mid-morning, after the company said its contract with Tesla would not be renewed after it expires.

"Mobileye's work with Tesla will not extend beyond the EyeQ3," Mobileye said in a statement, referring to its chips that provide image analysis for Tesla's Autopilot technology, which helps drivers steer and stay in lanes.

Mobileye in a statement said it will continue to support Tesla's ongoing upgrades to Autopilot, but "without any hardware updates."

Mobileye declined to say whether Tesla was not renewing the contract.

Mobileye's plans come at a time when Tesla's Autopilot is facing scrutiny from regulators following a fatal accident in early May. The Tesla crash spurred new debate about self-driving vehicles and the level of autonomy necessary to reduce the incidence of such crashes.

Tesla Chief Executive Elon Musk said in his latest "master plan" last week that his company planned to make fully autonomous vehicles in the future, but did not provide details.

Mobileye also reported better-than-expected second-quarter profit and revenue on Tuesday, helped by strong sales and higher prices for the EyeQ chip line.

Up to Monday's close, Mobileye's shares had risen 16.6 percent this year.

Tesla shares on Tuesday were down 1.7 percent at $226.20.