Tesla(TSLA.US) sues California DMV, seeking to clear the "false advertising" stain of FSD before the Robotaxi rollout

Bloomberg News has learned that Tesla (TSLA.US) has officially filed a lawsuit against the California government, aiming to overturn the administrative ruling by the California Department of Motor Vehicles (DMV) that accused its autopilot system of “false advertising.” This regulatory battle, which has lasted for years, has recently escalated again. In the lawsuit, Tesla firmly states that the DMV’s conclusion that it made misleading claims when marketing “Autopilot” and “Full Self-Driving” (FSD) features is unfounded.

In a complaint dated February 13, Tesla’s lawyers claim that the DMV “erroneously and baselessly” labeled the automaker as a “false advertiser” because the company previously used the terms Autopilot and FSD. Two months earlier, the California Administrative Hearing Office (OAH) had indicated that the DMV could temporarily revoke Tesla’s license to manufacture or sell vehicles in California.

The dispute dates back to 2021, when the California DMV launched an in-depth investigation into Tesla’s marketing strategies. The core issue was whether the product naming could lead consumers to believe that the vehicles were fully autonomous. According to an initial ruling by the OAH at the end of 2025, Tesla’s terminology was deemed misleading, risking a suspension of its vehicle sales license in the state.

In December, the court ruled in favor of the DMV, finding the terminology misleading and recommending license suspension. However, regulators ultimately eased the penalty and gave Tesla time to make corrections. Facing regulatory pressure, Tesla took a compromise early in 2026 by modifying its official descriptions and adding a “Supervised” suffix. On February 17, Tesla passed the DMV’s compliance review, temporarily avoiding license revocation.

Nevertheless, Tesla clearly does not accept the label of “false advertising” and has countered in the latest lawsuit, claiming that the company has provided sufficient risk warnings in user manuals and activation interfaces. According to Electrek, Tesla’s move aims to eliminate potential legal risks, protect its brand reputation, and pave the way for the commercialization of Robotaxi autonomous driving.

A few days before Tesla launched this counterattack, the DMV confirmed that Tesla had complied with an administrative decision made in December 2025, which required the company to cease using the term “Autopilot” in California marketing materials.

It is worth noting that this legal action comes at a time when Tesla is transitioning into autonomous taxis and self-driving technology. The company is currently testing a small number of autonomous vehicles in its Austin pilot project.

Since California is one of Tesla’s largest consumer markets and has a significant influence on industry regulation standards, the outcome of this legal challenge will directly impact global autonomous driving compliance standards.

Industry analysts suggest that if Tesla cannot clear the “misleading consumers” allegations through legal channels, it could trigger larger-scale class-action lawsuits and have a profound impact on the core AI-driven premium in its valuation model.