Tesla faces suspension in California due to false advertisement

The California DMV announced that sales of Tesla Inc. vehicles could be suspended for 30 days in the state, due to marketing practices that “mislead consumers.”

The California Department of Motor Vehicles (DMV) announced on December 16 that sales of Tesla Inc. vehicles could be suspended for 30 days in the state. This is because, according to the DMV, Tesla has promoted marketing practices that “mislead consumers” about the automated driving capabilities of its vehicles.

According to the California DMV’s notice, the suspension would take effect within 90 days, giving Tesla time to appeal or comply with the regulations. The agency accused the company of exaggerating the capabilities of features marketed as Autopilot and Full Self-Driving, and requested that an administrative law judge determine whether the suspension is justified.

Steve Gordon, director of the California DMV, stated that the agency is simply asking the company to market its vehicles appropriately. He said Tesla can take simple steps to resolve the issue definitively and avoid the suspension from moving forward.

Tesla v. California: misleading advertising results in sales suspension

According to statements from the state of California, Tesla violated state law by making false or misleading claims in 2021 and 2022, including advertisements asserting that its cars could complete trips without a driver behind the wheel. An amended complaint filed by the DMV in November 2023 stated that Tesla vehicles do not have, and did not have, that capability.

The DMV argued that these actions were sufficient grounds to suspend or revoke Tesla’s dealer and manufacturer licenses in the state, leading to a lengthy administrative proceeding before the California Office of Administrative Hearings. A five-day hearing was held in July. While such proceedings are not equivalent to a full civil or criminal trial in state or federal court, judges hear the evidence and review the documentation submitted by both sides before issuing a decision.

This is not an isolated case for Tesla. Last August, a federal jury in Florida ruled that Tesla must cover 33% of a $129 million damages award, in addition to paying $200 million in punitive damages, related to a 2019 accident in Key Largo in which a Tesla operating in Autopilot mode ran a stop sign and crashed into a parked vehicle.

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.

Sales in California will continue uninterrupted.
— Tesla North America (@tesla_na) December 17, 2025

Repercussions for Tesla

Tesla’s attorneys sought to block the DMV’s disciplinary action by arguing that its advertising is protected by freedom of speech under the First Amendment of the U.S. Constitution.

California is the largest automobile market in the United States and the leading state in electric vehicle adoption, so such a suspension would represent a significant blow to Tesla. According to data from Transport Topics, Tesla registered more than 135,000 new vehicles in California during the first nine months of 2025, representing approximately 11% of the total number of vehicles it delivered worldwide during that period.

Following the news, Tesla shares fell by as much as 2.2% in after-hours trading on December 16. Before the market opened on December 17, the stock was down as much as 0.6%.