Tesla Could Lose Its Right To Sell Vehicles In CA Over Self-Driving Lawsuit

OAKLAND, CA — Tesla will defend its ability to sell cars in California on Monday as state regulators move to crack down on what they say are years of misleading claims about the company’s self-driving technology, according to multiple reports.

A five-day hearing is set to begin in an Oakland courtroom on Monday, where the California Department of Motor Vehicles will seek to suspend or revoke Tesla's dealer license for at least 30 days, according to Bloomberg.

In May 2021, the California DMV began investigating Tesla’s marketing of Autopilot and Full Self‑Driving, examining whether the company misrepresented these features as fully autonomous, despite federal-level regulations defining self-driving differently. The DMV escalated that inquiry into formal administrative complaints in July 2022, challenging Tesla’s claims that its vehicles could “conduct short and long‑distance trips with no action required in the driver’s seat.”

In November 2023, the DMV amended its allegations to suspend Tesla's California licenses for at least 30 days. What's more, the department is pursuing a court order for Tesla to pay restitution, the San Francisco Chronicle reported. The company, in turn, has accused the DMV of mischaracterizing Tesla's marketing materials.

Separately, a 2019 Florida crash involving a Tesla Model S on Autopilot, which killed a pedestrian, became the subject of a federal wrongful-death trial in July 2025, Business Insider reported.

Widespread scrutiny of Tesla's driver-assistance software could spell trouble for Musk, who is in the process of launching an autonomous taxi business.

California regulators say Tesla violated state law by making false statements in its advertising materials in 2021 and 2022, when it described features as being "able to conduct short and long-distance trips with no action required in the driver’s seat."

In a separate and independent lawsuit filed by a plaintiff named Briggs Matsko, Tesla is accused of overhyping its autonomous features to "generate excitement."

The suit alleges Tesla misled consumers about the current capabilities of its software and repeatedly suggested it was on the verge of delivering a truly self-driving car. These claims, the lawsuit argues, were used to boost media attention, attract buyers and position the company as a tech leader in the electric vehicle market.

"Tesla has yet to produce anything even remotely approaching a fully self-driving car," according to the suit.

According to Bloomberg, an amended complaint filed by the California Department of Motor Vehicles in November 2023 stated that Tesla vehicles with driver-assist features “could not at the time of those advertisements, and cannot now, operate as autonomous vehicles.”

In response, Tesla has maintained that its statements are protected under the First Amendment, arguing in legal filings that the DMV has taken its marketing out of context and ignored the company’s repeated disclaimers.

“Tesla repeatedly and explicitly makes clear that its vehicles are not autonomous and require active driver supervision,” the company said in a February 2024 filing.

Tesla continues to advertise its "Full Self Driving" mode on its website, which it says is available in the U.S., Canada, China, Mexico and Puerto Rico.

"Tesla uses billions of miles of anonymous real-world driving data to train Full Self-Driving (Supervised) to take care of the most stressful parts of daily driving while helping make the roads safer for you and others. When enabled, your vehicle will drive you almost anywhere with your active supervision, requiring minimal intervention," the company's website read on Monday.

The company also says Tesla vehicles are capable of "driving to you" through parking lots and tight spaces, without a passenger or driver present.

The auto industry classifies self-driving technology on a scale from Level 0 to Level 5, with each level representing a greater degree of automation. At Level 0, systems offer no real automation—just basic warnings like lane departure alerts. Tesla’s Autopilot falls under Level 2, meaning it can assist with steering and speed but still requires the driver’s full attention and hands on the wheel at all times.

The news comes as Musk has reportedly returned his full attention to Tesla after working for President Donald Trump to lead the controversial Department of Government Efficiency.

"Back to working 7 days a week and sleeping in the office if my little kids are away," he wrote on X, which he also owns, on Saturday.

It has been a whirlwind several months for Musk, who went from publicly and financially backing Trump to threatening to form his own political party to fighting with the president over social media. The tech titan has also announced plans to launch his own political party, which would go up against Trump's MAGA.