California threatens Tesla sales ban over ‘misleading’ self-driving claims

California regulators are warning Tesla that it could lose its licence to sell cars in the state early next year unless the company reins in how it markets its self-driving technology, after a judge found the automaker has misled consumers for years.

In a decision released late on Tuesday, an administrative law judge recommended a 30-day suspension of Tesla’s sales licence in California, a significant penalty in the company’s largest US market, unless changes are made to how its driver-assistance features are presented.

The ruling stems from a case brought by the California Department of Motor Vehicles, which accused the Elon Musk-led company of deceptive marketing through its use of the terms “Autopilot” and “Full Self-Driving”.

Administrative Law Judge Juliet Cox, who oversaw five days of hearings in Oakland in July, concluded that Tesla’s branding overstated the capabilities of the technology and could lead consumers to believe the cars are more autonomous than they actually are.

Cox also recommended suspending Tesla’s manufacturing licence at its Fremont, California plant, though state regulators said they will not pursue that part of the proposed punishment.

Instead, Tesla will be given a 90-day window to revise its marketing and more clearly spell out the limits of its self-driving features. Failure to do so could trigger a temporary ban on vehicle sales in California.

After the DMV first filed its case against Tesla in 2023, the company made some adjustments, including adding language clarifying that its Full Self-Driving package still requires active human supervision.

“Tesla can take simple steps to pause this decision and permanently resolve this issue, steps autonomous vehicle companies and other automakers have been able to achieve,” said Steve Gordon, director of the California DMV.

Tesla played down the ruling. In a post on Musk’s X platform, the company dismissed the decision as regulatory overreach.

“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,” Tesla said. “Sales in California will continue uninterrupted.”

The threat of regulatory action comes at an awkward moment for the carmaker. Tesla has been grappling with a global slowdown in demand, exacerbated by political backlash linked to Musk’s high-profile role in slashing US government spending through the Department of Government Efficiency (DOGE), created under President Donald Trump.

Even after Musk’s departure from Washington following a falling-out with Trump, Tesla’s sales have continued to slide. Increased competition, an ageing model lineup and shifting consumer sentiment have all weighed on performance, despite updates to the Model Y and the launch of cheaper versions of the Model Y and Model X.

Overall, Tesla’s sales are down about 9 percent compared with 2024 levels through the first nine months of this year.