Elon Musk's Tesla Could Lose License To Sell Cars In California Amid Autopilot, FSD False Advertising Lawsuit: Report

Benzinga
2025.07.22 07:36
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Tesla Inc. faces a potential 30-day suspension of its dealer license in California due to a lawsuit filed by the DMV over alleged false advertising regarding its Autopilot and Full Self-Driving features. The DMV claims Tesla misled consumers, prompting a court hearing. This suspension could negatively impact Tesla's sales, which have already declined by 12.6% in the U.S. during Q2, despite a rebound in China. Tesla maintains a 44% EV market share and has sold over 3 million Model 3 units globally.

Tesla Inc. TSLA is back under the scrutiny of authorities as the California DMV, or Department of Motor Vehicles, filed a lawsuit to ban Tesla from selling cars in the state for 30 days over false advertising.

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What Happened: The DMV claims that Elon Musk's EV giant has misled consumers about the capabilities of Tesla's Autopilot and Full Self-Driving features, Electrek reported on Monday.

The DMV launched a probe into Tesla in 2021 for misleading advertising and officially sent in an inquiry to the company in 2022, asking Tesla to respond to "creating incorrect perceptions" about its systems, the report suggests.

However, Tesla states that the alerts in the FSD or Autopilot system, asking drivers to be attentive, should be enough to offset any misleading statements. A court has now scheduled a 5-day hearing and the DMV is pursuing a 30-day suspension of Tesla's dealer license in the state, the report says.

"The Department seeks an order suspending Respondent's manufacturer and dealer licenses for not less than thirty (30) days," the DMV appeal to the court states.

Why It Matters: Any suspension on Tesla's sales could prove to be detrimental for the company, which has experienced a 12.6% decline in sales in the U.S. during Q2, but remains a segment leader with 44% EV market share.

Tesla's sales, however, have experienced a rebound in China, where the company recorded over 12.3k insured registrations in July's second week. Tesla also filed for a long-range Model 3+ trim in China, offering over 500 miles on a single charge.

The automaker also shared that it recorded over 3 million Model 3 units sold worldwide. This comes in after Tesla's Q2 deliveries fared better than what was expected by experts.

Tesla offers Satisfactory Momentum and Quality, while scoring well on the Growth metric, but offering poor Value. For more such insights, sign up for Benzinga Edge Stock Rankings today!

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  • Bank Of America Sees 11% Upside For Tesla Stock Despite EV Credit Phase-Out, Tariff Risks: ‘Promise To Deliver Unsupervised FSD’

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