Tesla is facing a lawsuit in California that could have serious consequences. The California Department of Motor Vehicles (DMV) has deemed the company’s promotion of its Autopilot and Full Self-Driving systems misleading. The lawsuit could directly impact Tesla’s sales in the state. The DMV is considering the possibility of suspending or completely revoking Tesla’s license to sell vehicles in California.

Tesla Could Be Banned in California

The lawsuit began in July 2022. The DMV’s initial complaint alleged that Tesla’s marketing materials created the perception that its vehicles could operate fully autonomously without driver intervention.

Such statements allegedly created a perception of trust that exceeded the systems’ actual operating capabilities. The company’s videos, promotional material, and promotional statements are being criticized for giving consumers the impression that the vehicles offer a level of autonomy beyond their current technology.

In June 2025, a California judge rejected Tesla’s request to dismiss the lawsuit. The company was ordered to present its case before an administrative judge in Oakland. Five days of hearings are scheduled to begin next Monday. The ruling could directly impact Tesla’s legal ability to sell in the state.

Tesla’s legal team bases its defense on freedom of expression. The company argues that its marketing statements were taken out of context and that every system used in the vehicles explicitly stated that driver supervision was required. It also argues that, despite the systems being marketed as “Full Self-Driving,” the emphasis was always placed on the fact that they were technically driver-assisted.

The outcome of the case could set a precedent not only for Tesla but also for other companies developing autonomous driving technologies in the automotive sector. The decision is expected to be a significant indicator of how regulations will shape similar marketing approaches in the US.