By Sai Sachin R and Paul Lienert

BENGALURU/DETROIT (Reuters) - A rift between Tesla Motors Inc <TSLA.O> and key supplier Mobileye NV <MBLY.N> sent down shares of the Israeli maker of chips for the electric vehicle maker's semi-automated Autopilot system and fanned debate on self-driving vehicle technology.

Mobileye shares, which have been wildly popular with institutional and tech investors, were down 7.7 percent at $45.50 on Tuesday after the company said its contract with Tesla would not be renewed. Tesla stock fell 0.9 percent to $227.94.

Neither Mobileye nor Tesla would say which company initiated the move.

The split comes while Tesla's Autopilot is facing scrutiny from regulators following a fatal accident in early May. The crash spurred new debate about self-driving vehicles and the level of technology necessary to reduce the number of such incidents.

Mobileye's EyeQ chips provide image analysis for Tesla's Autopilot system, which helps the automaker's vehicles steer and stay in lanes.

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

Tesla in a statement said only that it was "transitioning to internally developed software for the camera portion of Autopilot."

In a December blog post, Tesla said Mobileye's EyeQ3 chip, which is used in the Model S and Model X, "is the best in the world at what it does, and that is why we use it."

Mobileye, which is working with about two dozen global vehicle manufacturers, said it planned by 2020 to offer a hardware/software system that can gather, fuse and analyze data from 20 different sensors, including cameras, lidar and radar.

Tesla has eschewed the laser-based lidar sensors that many manufacturers are incorporating into their self-driving systems, electing instead to focus on cameras, radar and ultrasonic sensors.

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

Mobileye's new EyeQ5 "system on chip" will be an important component in a fully autonomous driving system being jointly developed with BMW AG <BMWG.DE> and Intel Corp <INTC.O> and aimed at production in 2021.

BlueStar Indexes, which manages a U.S.-listed Israeli tech fund, said on Tuesday that Tesla accounted for less than 1 percent of Mobileye's current revenue and about 2 percent of projected 2019 sales. Compared with clients such as Volkswagen AG <VOWG_p.DE> and General Motors Co <GM.N>, "Tesla's impact is quite small," BlueStar said.

(Reporting by Sai Sachin R in Bengaluru and Paul Lienert in Detroit; Editing by Phil Berlowitz and Lisa Von Ahn)