Autonomous Investigation Halts Tesla Sales in California
In a significant turn of events, Tesla is currently embroiled in a legal battle with the California Department of Motor Vehicles (DMV) over allegations of false advertising regarding the capabilities of its "Full Self-Driving" (FSD) and "Autopilot" features.
The weeklong hearing, which concluded at the end of July 2025, saw the DMV accusing Tesla of misleading consumers about the autonomy of its vehicles, a violation of California law. Tesla, on the other hand, has maintained that it has always informed buyers that drivers cannot fully rely on these features and that drivers must remain attentive.
If the DMV’s requested suspension is granted, the consequences for Tesla would be severe. California accounts for about 30% of Tesla’s U.S. sales, and a month-long sales suspension would significantly impact Tesla’s quarterly deliveries and revenues. The company's U.S. sales have already declined in the first half of 2025, partially due to broader public relations issues and Musk’s political controversies.
In addition to the potential sales ban, Tesla faces a related class-action lawsuit and a National Highway Traffic Safety Administration investigation into "phantom braking" incidents associated with its driver assistance systems.
The DMV alleges that Tesla’s advertising falsely implies the vehicles are more autonomous than they actually are. If found guilty, Tesla could be forced to change its marketing on mobility technology in California. The company could also be ordered to compensate owners for the unmet performance of their vehicles' semi-autonomous driving feature.
Tesla CEO Elon Musk's contentious relationship with regulators has triggered accountability concerns with regulators and customers. The negative ruling in the California hearings could further impact Tesla's future business model around Autopilot and Full-Self-Driving (FSD) technology.
Independent data analyst Troy Teslake reported in late 2022 that an estimated 11% of Tesla vehicle buyers were taking the FSD package, down from 15%-20% in 2022. A separate analysis by the Washington Post based on NHTSA data since 2019 found 736 crashes encompassing 17 fatalities, with 11 deaths occurring since May 2022.
As of July 21, Tesla's shareholder value is approximately $1.063 trillion, making it the 10th most valuable company globally. Wall Street analysts predict profits from Autopilot, FSD, artificial intelligence (AI), and robotics will drive Tesla's future profits and shareholder value. However, the current legal challenges could potentially disrupt these predictions.
The current status is that no final ruling has yet been issued following the hearing. The DMV’s efforts could lead to a temporary ban on Tesla’s ability to sell vehicles in California, along with possible consumer compensation and required changes to Tesla’s marketing practices.
- The legal battle between Tesla and the California Department of Motor Vehicles (DMV) revolves around allegations of false advertising about Tesla's "Full Self-Driving" (FSD) and "Autopilot" features, which are part of the vehicle technology sector.
- Tesla's potential suspension of vehicle sales in California, due to the DMV's requested action, could significantly impact the company's business and finance, as California accounts for about 30% of Tesla's U.S. sales.
- The automotive industry, particularly the transportation sector, is closely watching this legal battle, as Tesla's fortunes in terms of self-driving technology could have implications for future autonomous driving advancements.
- The outcome of this case could potentially affect Tesla's stock market value, as the company's shareholder value currently stands at approximately $1.063 trillion, making it one of the most valuable companies globally. This implies that the finance and business sectors are also closely monitoring this development.
