A California administrative law judge delivered a significant blow to Tesla this week, ruling that the electric vehicle maker engaged in deceptive marketing practices that misled customers about what its Autopilot and Full Self-Driving systems can actually do.
The decision caps a years-long investigation by the California Department of Motor Vehicles into whether Tesla’s marketing gave drivers an inflated sense of their vehicles’ autonomous capabilities.
The judge didn’t just find against Tesla. She agreed with the DMV’s request to suspend the company’s sales and manufacturing licenses in California for 30 days as punishment. But the DMV immediately stayed that suspension, giving Tesla 60 days to fix the problem.
The fix options are stark: either drop the Autopilot name entirely, or actually deliver software that makes the cars truly autonomous. If Tesla does neither, the licenses get suspended.
Tesla’s response suggested defiance. The company posted on X that “Sales in California will continue uninterrupted.”
Tesla dismissed the entire proceeding as overreach, noting that “This was a ‘consumer protection’ order about the use of the term ‘Autopilot’ in a case where not one single customer came forward to say there’s a problem.”
The judge anticipated and rejected this argument in her written decision. Consumer protection law doesn’t require actual victims before regulators can act, she wrote. The DMV has authority to “act affirmatively to prevent deceptive advertising” before people get hurt or deceived.
She also addressed Tesla’s apparent plan to ignore the ruling. Without the threat of license suspension, Tesla has given no indication it will change the Autopilot name or stop making misleading claims about what the technology can do, the judge wrote. Suspension represents “a reasonable remedy” given the company’s posture.
DMV Director Steve Gordon framed the decision as holding all automakers to consistent standards.
“The DMV’s decision today confirms that the department will hold every vehicle manufacturer to the highest safety standards to keep California’s drivers, passengers and pedestrians protected,” Gordon said. “Tesla can take simple steps to pause this decision and permanently resolve this issue, steps autonomous vehicle companies and other automakers have been able to achieve in California’s nation-leading and supportive innovation marketplace.”
Tesla faces scrutiny over its Autopilot marketing from multiple angles. The California Attorney General, the Department of Justice, and the Securities and Exchange Commission have all investigated similar allegations. The company has faced and settled numerous personal injury lawsuits from crashes involving Autopilot.
The DMV case has wound through California’s Office of Administrative Hearings for years. The core allegation: Tesla’s marketing led customers to believe their cars had far more autonomous capability than they actually possess.
This inflated confidence, the DMV argued, contributed to dozens of crashes and multiple deaths. Drivers who thought their Tesla could handle situations it couldn’t failed to intervene when the system made dangerous mistakes.
Tesla defended its marketing as protected speech under the First Amendment, arguing the government cannot restrict how it describes its products.
The judge’s rejection of that argument carries significant implications. If the ruling stands, it establishes that consumer protection law can override speech protections when marketing creates safety risks through deception.
California remains Tesla’s largest U.S. market, meaning even a temporary sales shutdown would hammer the company’s bottom line. The state accounts for a disproportionate share of electric vehicle adoption nationwide.
The manufacturing implications could prove even more severe. Tesla built a massive factory in Austin, Texas, and moved its corporate headquarters there in what some saw as a response to California’s regulatory environment. But the company still depends heavily on its Fremont, California factory.
That Fremont plant produces hundreds of thousands of vehicles annually, including every Model 3 sedan sold in North America. Shutting it down for even 30 days would create a production gap Tesla couldn’t easily fill.
The timing of the decision creates an awkward juxtaposition with Tesla’s expansion into robotaxis. This past weekend in Austin, the company took a dramatic step in its autonomous vehicle ambitions: removing safety drivers from its small fleet of robotaxis operating in the city.
For six months, Tesla had been offering rides to Austin customers with a safety monitor present in either the driver’s or passenger’s seat, ready to take control if the system failed. Now those vehicles operate with no human backup.
CEO Elon Musk has said the robotaxis run different software than customer vehicles. But the California ruling questions whether Tesla can be trusted when it tells customers or regulators about what its autonomous systems can and cannot do.
The Autopilot name has drawn criticism from safety advocates for years. The term suggests a plane’s autopilot, which can fly the aircraft for extended periods while pilots monitor. But Tesla’s Autopilot requires constant hands-on-wheel attention and can make sudden, dangerous mistakes.
Full Self-Driving carries even more misleading implications. Despite the name declaring the vehicle can drive itself fully, the system remains what engineers call Level 2 autonomy. The driver must supervise constantly and be ready to take over at any moment.
True self-driving capability, where a vehicle can handle all driving tasks without human intervention, remains years away across the auto industry despite billions in investment.
Whether Tesla will actually comply with the judge’s order remains uncertain. The company’s statement suggests it plans to simply ignore the ruling and continue business as usual.
That sets up a potential showdown with California regulators who now must decide whether to follow through on the threatened license suspension or find another path forward.
