Tesla (Nasdaq: TSLA) suffered dual setbacks in California this week as a federal judge allowed drivers to pursue a class-action lawsuit over self-driving promises while state regulators continued blocking the company’s robotaxi expansion plans.
US District Judge Rita Lin ruled Tuesday that Tesla drivers can proceed with a certified class action alleging the electric vehicle maker and CEO Elon Musk misled customers for eight years about their cars’ autonomous driving capabilities. The lawsuit covers Tesla’s claims from October 2016 to August 2024 that vehicles contained “hardware for full self-driving.”
The ruling comes as Tesla faces regulatory roadblocks preventing expansion of its robotaxi service to California. The California Public Utilities Commission has confirmed that Tesla lacks the necessary permits to operate autonomous vehicles for public passenger service in the state, despite Musk’s promises of imminent Bay Area launches.
Tesla currently operates only a “friends and family” ride service in the Bay Area using human drivers — not the autonomous robotaxis operating in Austin, Texas. California regulators said Tesla cannot use terms like “robotaxi” or “taxi” in the state and must keep safety drivers behind the wheel.
Previously: California Regulators Block Tesla Robotaxi Service, Limit Company to Human-Driven Cars
The company has not applied for the required driverless testing or deployment permits, according to the California Department of Motor Vehicles, contradicting Musk’s claims that regulatory approval is the only remaining hurdle.
Musk announced during Tesla’s second-quarter earnings call that major Full Self-Driving software improvements are coming in the third quarter of 2025. The updates will integrate technology from Tesla’s Austin robotaxi fleet into consumer vehicles, promising what Musk called a “step change improvement” in capability.
Read: Tesla Executives Knew Robotaxi Claims Were Overstated, Documents Show
Tesla also plans to release FSD version 14 with 10 times more parameters and “exponentially better safety” within approximately six weeks, according to Musk’s recent statements.
The class-action lawsuit covers California drivers who purchased Full Self-Driving packages between May 2017 and July 2024. Judge Lin found that Tesla’s direct-sales model made it reasonable for customers to rely on the company’s website claims about autonomous capabilities.
Federal safety regulators continue examining Tesla’s self-driving software, which remains a key component of the company’s robotaxi ambitions and is also central to ongoing federal probes into crashes involving Tesla’s driver-assistance systems.
Read: Tesla, Musk Sued by Shareholders Over Robotaxi Safety Claims
Despite Musk’s repeated promises about California robotaxi expansion, prediction markets show only 18.5% odds of successful deployment, down from over 30% in June. Tesla shares have declined about 22% this year, the worst performance among major technology companies.
Information for this story was found via Reuters, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
