Tesla Motors is awaiting the outcome of hearings in California that could result in the company being dealt a 30-day stop-sale order for not living up to advertised self-driving claims, as well as an order forcing the automaker to compensate owners for the unmet performance of the vehicles' semi-autonomous driving feature and forcing it to change its marketing on mobility technology in the state.
While a decision by an administrative judge in California would not be the last word on Tesla’s autonomous driving future, a negative ruling could deal another blow to the battery-electric vehicle (BEV) company’s future business model around its marketed Autopilot and Full-Self-Driving (FSD) technology.
The stakes are high for Tesla successfully defending its commitment to semi-autonomous-vehicle technology for passenger BEVs as well as robotaxis. Wall Street analysts have predicted profits from those areas, as well as from artificial intelligence (AI) and robotics, will drive Tesla’s future profits and shareholder value rather than the sale of BEV passenger vehicles.
The focus on Tesla's all-important self-driving technology comes the same week as the company reports second quarter earnings, which analysts expect to show the biggest revenue drop in a decade.
As Wedbush Securities analyst Dan Ives in May described Tesla’s robotaxi launch as the dawn of a “golden age of autonomous vehicles,” potentially driving Tesla’s stock up 40% and lifting its market cap to $2 trillion by end‑2026, the scalability of autonomy is central to Tesla’s future value and is a “game-changer,” reliant on FSD and robotaxi expansion.
The process of going after FSD in California began in May 2021 when the state’s Department of Motor Vehicles (DMV) began scrutinizing Tesla’s marketing of Autopilot and FSD amid growing concerns over fatal crashes involving the systems. By July 2022, the DMV filed two formal administrative charges in the Office of Administrative Hearings, accusing Tesla of naming and advertising its driver‑assist systems in a way that falsely implied full autonomy – violating a California Vehicle Code provision banning misleading marketing of partially automated features.
According to publicly available records at the state’s DMV, Tesla has defended itself throughout the process by telling policymakers that its disclaimers state “active human supervision” is required when engaging Autopilot and FSD and the term “self-driving” is “aspirational” rather than deceptive. The automaker has also argued that the state allowed the company to utilize and market the names Autopilot and FSD for years, giving Tesla “implicit” approval to do so. Tesla attorneys have also argued that an order to cease using the terms identified with Tesla technologies is an infringement on the company’s right to free speech.
Tesla has faced setbacks in making its case. In June 2024, Judge Juliet Cox refused Tesla’s motion to dismiss, stating the DMV had made its case and deserved to present full evidence. Cox serves as an administrative law judge with the California Office of Administrative Hearings – General Jurisdiction Division – based in Oakland. Her role is to preside over administrative adjudications, including the current proceeding regarding Tesla’s licenses.
Additionally, a federal court in San Francisco in March 2024 allowed a consumer class-action suit on similar deceptive-marketing grounds to proceed.
In their filing, California officials have charged that Tesla “misled consumers for years” by using names like Autopilot and Full Self‑Driving, which suggest fully autonomous performance that Tesla systems do not deliver. The DMV presented the judge with numerous examples from Tesla’s own website, emails, social media and user complaints. The agency emphasizes in filings that the average consumer reasonably interprets “self‑driving” to mean full autonomy – thus false and deceptive under the law.
Cox will issue a proposed decision, which should come within 30 to 60 days after the hearing concluded this week. The decision then goes to the California DMV director, who can rule to adopt Cox’s decision, modify it or reject it.
If Tesla receives an unfavorable decision (e.g., license suspension or restitution order), it can file a petition challenging the DMV’s final decision in Superior Court on grounds such as abuse of discretion, decision not supported by findings or insufficient evidence.
Tesla could also request a stay of enforcement during the appeal – i.e., to delay a stop-sell order from taking effect until the judicial review is complete.
California’s issues with Tesla’s self-driving technology are backed up by the National Highway Traffic Safety Administration, which conducted a three-year investigation (Jan. 2018–Aug. 2023) reviewing 956 crashes involving Tesla Autopilot, finding at least 467 crashes where Autopilot was believed to be employed, including 13 fatal accidents, according to the agency’s report. 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.
Tesla CEO Elon Musk’s contentious relationship with regulators has triggered accountability concerns with regulators and customers. Tesla doesn’t report take rates for its semi-autonomous features. But Troy Teslake, an independent data analyst and researcher specializing in Tesla vehicle production, delivery and ownership trends, reported in late 2022 (his most recent report), that an estimated 11% of Tesla vehicle buyers were taking the FSD package, down from 15%-20% in 2022.
Tesla’s shareholder value as of July 21 approximately $1.063 trillion, according to Yahoo Finance, making it the 10th most valuable company globally.
