Tesla is in hot water in a key American market, the Guardian reported, although the hammer hasn't dropped just yet.
What's happening?
On Dec. 16, an administrative law judge (ALJ) found that Tesla had engaged in deceptive marketing regarding its Autopilot and Full Self-Driving (FSD) functionality, materially misleading California consumers, according to TechCrunch.
California's Department of Motor Vehicles (DMV) first formally raised concerns about Tesla's marketing practices in 2022, per CNBC.
The agency asked the ALJ to impose a specific penalty on Tesla, suspending the electric vehicle manufacturer's licenses to sell and manufacture in California for 30 days. The ALJ concurred with the DMV and issued the order.
During a Dec. 16 news conference, California DMV director Steve Gordon told reporters that the agency stayed the order for 60 days to allow Tesla to comply.
Gordon said California wanted to extend to Tesla "one more chance to be able to remedy the situation" and "find a way to get these misleading statements corrected."
Although Tesla had no comment for reporters, a Dec. 16 tweet by Tesla North America (@tesla_na) implied that the EV manufacturer had no plans to work with the state.
"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," the tweet began.
"Sales in California will continue uninterrupted."
Why is this concerning?
California is, by a large margin, the state with the strongest Tesla sales.
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The U.S. Department of Energy's electric vehicle registrations chart had to be structured in a specific way to include California alongside other states, given its high EV adoption rate.
Between generous state incentives and California's status as the most populous state, its EV market is certainly where Tesla's bread is buttered.
Throughout 2025, Tesla's sales have been volatile, with sustained slumps in the U.S. and globally. The brand also bore the brunt of backlash generated by CEO Elon Musk's controversial political activity in the United States, an impact quantified by the National Bureau of Economic Research in October.
Tesla's consumer standing faltered significantly, and arguably, the brand needs all the tailwinds it can get; losing a month of sales and manufacturing time in its biggest market could prove catastrophic.
Moreover, Tesla appeared to imply that it had no plans to comply with the DMV's request, and its FSD and Autopilot software have been the subject of significant negative press in 2025.
What's being done about it?
Taken together, Tesla's refusal to play ball with California could deepen its sales troubles — and the brand's approach to concerns about its marketing practices could dissuade drivers in California or other states from making their next car an EV.
Gordon said Tesla could appeal the judge's decision, and the brand still had 60 days to comply
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