Tesla avoided a 30-day suspension of its dealer and manufacturer licenses in California by complying with a state order to stop using the term "Autopilot" in vehicle marketing, the California Department of Motor Vehicles announced on February 17, settling a nearly three-year case that found the electric vehicle maker violated state law through misleading advertising of its advanced driver-assistance systems.
The decision allows Tesla to continue selling vehicles uninterrupted in California, its largest U.S. market accounting for approximately 30% of company sales. The DMV's announcement came just days before a February 14 compliance deadline that would have triggered the suspension, marking the conclusion of a regulatory dispute that began with formal accusations filed in November 2023.
Regulatory Finding on Misleading Terminology
In December 2025, an administrative law judge ruled that Tesla's use of "Autopilot" to describe its Advanced Driver Assistance System features is misleading and violates state law. The judge found Tesla's naming convention "follows a long but unlawful tradition of intentionally using ambiguity to mislead consumers," according to the official DMV decision.
The case centered on Tesla's marketing materials beginning in May 2021 that described Autopilot and Full Self-Driving Capability using the phrase: "The system is designed to be able to conduct short and long-distance trips with no action required by the person in the driver's seat." Regulators argued this language falsely implied the vehicles could operate autonomously when they cannot and still require constant driver supervision.
California DMV Director Steve Gordon stated the agency "has zero tolerance for misleading advertising that puts safety at risk. When companies make false claims about vehicle capabilities, they endanger lives and the state will hold them accountable."
Tesla's Compliance Strategy and Business Pivot
Tesla went beyond California's requirements by discontinuing Autopilot entirely across the United States and Canada in January 2026, not just removing it from marketing materials. The company simultaneously shifted its business model for advanced driver assistance, eliminating the standalone Autopilot offering and funneling all customers toward its more capable Full Self-Driving system.
Previously, Tesla offered FSD as an $8,000 one-time purchase option. The company converted this to a subscription-only model at $99 per month on February 14—exactly coinciding with the DMV's compliance deadline. CEO Elon Musk indicated the subscription fee will increase as the system gains additional capabilities.
The timing raised questions about whether regulatory pressure accelerated Tesla's planned business model transition or whether the company strategically used compliance requirements to justify a shift that improves recurring revenue. Subscription models generate predictable income streams valued more highly by investors than one-time purchases.
Modified Full Self-Driving Terminology Remains
Tesla previously addressed DMV concerns about "Full Self-Driving" terminology by adding clarifying language. The company now markets the system as "Full Self-Driving (Supervised)" with the parenthetical clarification appearing consistently across Tesla's website and marketing materials to indicate driver supervision remains required.
The judge's original ruling in November 2025 recommended 30-day suspensions of both Tesla's manufacturer and dealer licenses. The DMV adopted the judge's findings regarding violations but reduced penalties, imposing a permanent stay on the manufacturer license suspension and providing 60 days for corrective action on the Autopilot terminology.
Broader Context on Autonomous Driving Marketing
Tesla's case reflects broader regulatory scrutiny of how AI and autonomous vehicle companies market driver-assistance technology. Multiple incidents involving Tesla vehicles operating with Autopilot or FSD engaged have resulted in accidents and fatalities, with critics arguing misleading terminology contributes to driver overconfidence and misuse.
A class-action lawsuit from hundreds of Tesla owners alleges the company oversold Full Self-Driving capabilities, claiming vehicles do not perform as advertised despite customers paying thousands of dollars for the feature. That litigation remains separate from the California DMV case but demonstrates ongoing legal challenges related to Tesla's marketing of autonomous capabilities.
Tesla's defense in the DMV case argued the agency had known about Autopilot and Full Self-Driving terminology since 2014 and 2016 respectively, essentially claiming a statute of limitations should apply to consumer protection violations. The judge rejected this argument, finding Tesla's long-running use of misleading terms did not excuse continued violations.
For the broader autonomous vehicle industry, California's enforcement action signals regulators will scrutinize marketing claims about AI-powered driving systems and hold companies accountable when terminology implies capabilities that don't exist. The case establishes precedent that "supervised" or similar qualifying language is necessary when marketing advanced driver-assistance systems that require human oversight.
Tesla declined to comment on whether it plans similar marketing changes in other states or international markets beyond the U.S. and Canada discontinuation of Autopilot.
