Tesla Faces California License Suspension Over Autopilot Problems

Tesla Inc. (Nasdaq: TSLA) could lose its license to sell cars in California as regulators escalate their crackdown on the company’s troubled Autopilot system, which has been linked to hundreds of crashes and dozens of deaths.

A five-day hearing that began Monday will determine whether California can suspend Tesla’s dealer license over allegations the company made misleading claims about its driver-assistance technology. The action is the most serious penalty Tesla has faced over Autopilot, coming after a string of federal investigations and a recall of more than 2 million vehicles.

Tesla has been under intense federal scrutiny since December 2023, when it recalled nearly every vehicle it had built to fix defective Autopilot monitoring systems. But federal regulators found the recall insufficient, identifying 20 additional crashes involving vehicles that received the updates.

As of October 2024, federal safety regulators had tracked 1,399 incidents in which Tesla’s driver assistance systems were engaged within 30 seconds of a collision, and 31 of those had resulted in fatalities. The problems have expanded beyond Autopilot to Tesla’s “Full Self-Driving” system, which became the subject of a separate federal investigation in October after four crashes in low-visibility conditions, including one that killed a pedestrian.

The California Department of Motor Vehicles alleges Tesla violated state law by advertising that vehicles could “conduct short and long-distance trips with no action required in the driver’s seat” when the technology requires constant human supervision. Tesla argues its marketing statements are protected speech and that the company has always disclosed vehicles require active driver supervision.

Tesla critics placed 58 makeshift tombstones outside the Oakland courthouse, representing people they say died in crashes involving Tesla’s Autopilot.

If California prevails, the state could suspend Tesla’s manufacturing and sales licenses for at least 30 days, significantly impacting operations in one of the company’s largest markets. The case comes as CEO Elon Musk continues promising fully autonomous vehicles, recently unveiling a robotaxi prototype and claiming autonomous Teslas will operate without human drivers next year.

Read: California Judge Forces Tesla To Face Allegations of Misleading Autopilot and FSD Claims

But federal approval for such vehicles is unlikely while multiple safety investigations remain ongoing. Mary Cummings, an engineering professor testifying in the case, said Tesla’s marketing creates false confidence.

“It engenders a lot more inappropriate confidence in the car, because autopilot is such a good technology in aviation,” she said.

Information for this story was found via Bloomberg, 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.