Tesla Faces California Sales Halt Over Marketing of its Full Self-Driving System, Autopilot

In Focus

• The California sales suspension will start after 90 days
• The sales halt will hurt Tesla sales in the company’s largest U.S. market
• Tesla lawyers argue the regulator overlooked driver-assistance system disclosures

Tesla is facing a 30-day sales halt in California following allegations that its marketing misleads buyers regarding actual capabilities of its automated driving systems. According to Yahoo Finance, the California Department of Motor Vehicles (DMV) said the suspension will begin after 90 days, allowing Tesla time to comply or appeal the decision.

What a Sales Suspension Means for Tesla

Being Tesla’s largest market in the U.S., suspension of a sales license in California will be a major blow for the EV manufacturer. In the first nine months of this year, Tesla sales in California stood at 135,000 new vehicles.

This is equivalent to about 11% of the company’s global deliveries for the same period. The company recently released standard versions of Model 3 and Model Y EVs in a bid to unlock demand. California also leads in adoption of electric vehicles in the market, which means a temporary disruption could be costly for Tesla.

Tesla faces sales halt in California days after an analysis showed the EV maker issued $3 billion worth of stock awards to board members. While experts argued that such awards give directors more reward at minimal risk, Tesla justified the compensation as equal to directors’ effort.

DMV’s Lawsuit Against Tesla

The DMV investigated marketing practices by the EV maker between 2021 and 2022. During this time, the regulator found that Tesla made misleading advertising statements. These included claims that its vehicles could “conduct short and long-distance trips with no action required in the driver’s seat.”

In November 2023, the agency filed the Tesla Autopilot lawsuit in California . In an amended complaint, the DMV stated that Tesla vehicles with driver-assist technology “could not, at the time of those advertisements, and cannot now, operate as autonomous vehicles.”

The agency argued that these statements justified suspension or revocation of the company’s dealer and manufacturing license in California. The lawsuit culminated in a five-day hearing in July 2025.

Tesla has faced scrutiny from regulators in the U.S. over the safety of its products. In October 2025, Tesla recalled over 63,00 vehicles over a defect in the front parking lights that could impair visibility for oncoming drivers.

Tesla’s Response to DMV’s Action

Tesla’s legal team resisted DMV’s disciplinary action, claiming that the First Amendment of the US Constitution protects the company’s advertising as free speech. The lawyers accused the DMV of overlooking Tesla’s disclosures and warnings about its driver-assistance systems.

“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. Sales in California will continue uninterrupted,” Tesla’s statement read in part as reported by Yahoo Finance.

In the California DMV Tesla ruling, the administrative court recommended a 30-day suspension of Tesla’s production license, an order that the DMV opted to stay. Tesla’s car factory in the San Francisco Bay Area can produce over 650,000 vehicles per year. It is the company’s second largest plant after the Shanghai factory.