Tesla has two basic problems with their "autopilot". One is hype, and one is bad technical design.
Tesla's "autopilot" is just automatic lane keeping and automatic cruise control. Mercedes and BMW have been shipping that for years. The other car companies have hardware to check if the driver's hands are on the wheel. Tesla not only didn't do that, they hyped those basic functions as being an "autopilot", as if they had something comparable to what Google has. Tesla has significantly overhyped their technology, to a dangerous level.
Here's another Tesla crash, from yesterday.[1] This is a Tesla rear-ending the corner of a stalled van on a highway. This may be an "automation in wrong mode" error, and complicated excuses from Tesla will probably be forthcoming. That's not good enough. Airline pilots get into "wrong mode" errors, and they get extensive training, including simulator time. Drivers don't get that. This driver presumably thought the automation would do something sensible in that situation. It didn't.
The other big Tesla problem is a pure technical design error - the bumper-mounted radar is blind at windshield height. This is the immediate cause of the fatal accident involving under-running the semitrailer. It's also the cause of the parking accident with the truck with overhanging load sticking out the back.[2] Tesla's implementation has deadly blind spots. They need a radar at windshield-top height. It's quite likely, now that the NHTSA is looking into this crash, that Tesla will have to do a recall and retrofit one. (Along with hands-on-wheel sensors.)
Tesla was relying on stereo cameras too much. Depth from stereo is always iffy; there needs to be some detail on the target to get range. You can't range a uniform surface with stereo vision. (Human flyers have the same problem flying over ice.) A big white truck under some lighting conditions has that property. Cameras are useful, but backed only by today's algorithms, not enough. Teslas come with a sensor suite inadequate for the job.
From a software perspective, Tesla's software seems to be overoptimistic that there's no problem ahead. 3D vision systems know when they don't have range info for a large area. Tesla's software was willing to drive into that. It didn't note the absence of range info for the road surface; it may not even be profiling the road ahead. (We all had to do that in the DARPA Grand Challenge because we were operating off-road. That's a solved problem. Google does it with their roof-mounted LIDAR.) Tesla owners have asked for "pothole detection" as a feature. Lack of this may eventually take someone off a cliff.
The press is gradually picking up on this. Until recently, Tesla's autopilot was treated as a magic black box in the press. Now some automotive writers are starting to ask the right questions.
This is not a setback for automatic driving. This is just a Tesla problem.
[1] https://www.youtube.com/watch?v=qQkx-4pFjus [2] http://www.roadandtrack.com/new-cars/car-technology/news/a29...