The California Department of Motor Vehicles (DMV) claims that Tesla’s advertising misrepresented these systems as capable of fully autonomous driving when they are actually limited to level 2 driver assistance, which still requires constant driver supervision. If the company does not adjust its marketing, it could face a sales suspension in one of its most vital markets.
This issue comes at a critical time for Tesla, which is already experiencing challenges in the U.S. EV market. The potential sales ban could further exacerbate the company’s difficulties in maintaining its market share in California, a state that accounts for a significant portion of Tesla’s sales.
A Reputation at Risk
At the heart of the controversy is Tesla’s use of terms like “Autopilot” and “Full Self-Driving.” According to the California DMV, these labels mislead consumers into believing that Tesla vehicles can drive themselves without the need for driver intervention. In reality, the systems are classified as advanced driver assistance technologies, meaning that drivers must remain alert and ready to take control of the vehicle at any time.
After a lengthy investigation, a California judge concluded that Tesla’s advertising was indeed deceptive. The DMV has given the company a 60 to 90-day window to correct its marketing, warning that failure to comply could result in a 30-day suspension of Tesla’s sales licenses.
Tesla has already made some changes, such as rebranding the “Full Self-Driving” package to “Full Self-Driving (Supervised)” to indicate that the system requires active supervision. However, this adjustment may not be sufficient to satisfy the DMV’s concerns.
California: A Crucial Market for Tesla
California is an essential market for Tesla, representing nearly a third of the company’s total U.S. sales. In the first nine months of 2025, Tesla sold over 135,000 vehicles in the state, although sales have dropped by 15% compared to the previous year. A 30-day sales ban would have a significant financial impact on Tesla, especially considering the state’s critical role in the company’s overall sales performance.
In addition to the sales loss, Tesla’s main manufacturing plant is located in Fremont, California. A sales suspension could complicate operations at the plant, further straining Tesla’s business. While the company has been able to weather previous market fluctuations, the potential suspension in California could signal greater challenges ahead, particularly in a market already affected by a slowdown in electric vehicle sales.
A Growing Regulatory Challenge
Tesla’s problems in California are part of a broader regulatory issue surrounding its Autopilot and Full Self-Driving features. In addition to the state-level scrutiny, Tesla is under investigation by the U.S. Department of Justice and the Securities and Exchange Commission (SEC) over the company’s claims about its autonomous driving capabilities. In Europe, consumer protection authorities have also raised concerns about the accuracy of Tesla’s marketing and its potential to mislead customers.
Tesla is also facing regulatory pressure in China, where the government has imposed restrictions on certain vehicle features and limited customer tests after several high-profile incidents. These global challenges highlight the growing need for Tesla to align its marketing with the actual capabilities of its technology, especially as governments around the world continue to tighten regulations on autonomous vehicles.
