Tesla (TSLA) could see its electric vehicle (EV) sales halt in one of its biggest U.S. markets, California, over deceptive marketing language of its “Autopilot” and “Full Self-Driving” (FSD) features. Yesterday, a California judge ruled that Tesla faces a 30-day suspension of its licenses to sell and manufacture cars in the state, due to falsely implying that these systems were fully automated driving.
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However, the California Department of Motor Vehicles (DMV) paused the order suspending Tesla’s manufacturing license, giving the company 90 days to address any deceptive or confusing marketing claims. Meanwhile, Tesla stock hit a fresh 52-week high of $491.50 yesterday, driven by advances in its robotaxi, AI, and robotics businesses.
How Tesla’s Claims Misled Consumers
In 2022, California’s DMV accused Tesla of misleading ads for Autopilot and FSD, which suggested that cars could drive fully on their own without supervision. In reality, drivers are required to stay alert and ready to take over. Due to these issues, Tesla later renamed its top driver-assist feature to Full Self-Driving (Supervised).
The California judge ruled that the term “Full Self-Driving Capability” tricks reasonable buyers into thinking that no constant human attention is needed, which is false both technically and legally, violating California laws.
If Tesla is unable to resolve these marketing issues within 90 days, the DMV will greenlight the 30-day sales suspension in the state. However, it will not enforce the judge’s order to stall manufacturing of Tesla EVs, to ensure there is no disruption to Tesla’s factory operations in the state. Steve Gordon, director of the California DMV stated, “We want to be fair to them and give them the chance to find a resolution.”
Tesla Rebuffs Misleading Autopilot Allegations
Tesla countered that this “consumer protection” order targeted the term “Autopilot,” yet no customers have come forward with complaints. A lawyer for the EV maker said, “Tesla has never misled consumers,” emphasizing that sales in California will continue uninterrupted.
Tesla maintains it has told customers that Autopilot and FSD are driver-assistance features, not full self-driving, and that drivers must stay alert and in control. It says these limits are explained on its website, on screens in the car, and in the owner’s manuals.
Tesla has been facing criticism from state and federal regulators over its automated driving tech. This has created risks for Tesla, which stakes its future on self-driving cars and has launched a robotaxi business.
Is Tesla a Good Stock to Buy?
Analysts remain cautious about Tesla’s long-term prospects amid declining EV sales and a lofty valuation. On TipRanks, TSLA stock has a Hold consensus rating based on 13 Buys, 11 Holds, and nine Sell ratings. The average Tesla price target of $388.31 implies 20.7% downside potential from current levels. Year-to-date, TSLA stock has gained 21.3%.
