Here's an awkward situation: Tesla Inc. (TSLA) has been ordered by California regulators to stop calling its driver assistance technology "Autopilot" because, well, it turns out calling something "Autopilot" when it can't actually pilot itself is considered misleading. Who knew?
The Judge's Ruling
On November 21, California Administrative Law Judge Juliet Cox issued a proposed decision that didn't mince words about Tesla's marketing practices. The case stems from a lawsuit filed earlier this year by the California Department of Motor Vehicles, which took issue with how Tesla branded its driver assistance features as "Full Self-Driving" and "Autopilot."
The DMV's complaint highlighted that Tesla's website described its FSD system as being "designed to be able to conduct short and long-distance trips with no action required by the person in the driver's seat." That's a bold claim for a system that, according to Tesla's own legal team, doesn't actually work that way.
During the hearings, Tesla attorney Matthew Benedetto made what might be the understatement of the year: "Cars with Full Self-Driving capabilities are currently not capable of driving themselves." It's the kind of admission that makes you wonder why the company fights so hard to keep those names.
The Punishment That Wasn't
Judge Cox initially recommended suspending Tesla's license to sell and manufacture vehicles in California for 30 days. That would have been a serious blow considering California is Tesla's biggest domestic market. But Steve Gordon, Director of the California Department of Motor Vehicles, announced during a Tuesday press briefing that regulators decided to take a softer approach.
The DMV chose not to pursue the manufacturing license suspension at all. As for the sales license suspension, they're imposing a 90-day stay, essentially giving Tesla three months to clean up its marketing materials and come up with a new name for Autopilot.
"We want to be fair to them and give them a chance to see if they can find a resolution now that there is a ruling from the administrative law judge," Gordon explained. The proposed decision was sent to the DMV for consideration but remains sealed from public view until December 22.
Stock Hits Record Despite Regulatory Headwind
You might think a ruling that your flagship technology's name is deceptive would dampen investor enthusiasm. You would be wrong. Tesla shares soared 3.07% on Tuesday to hit a new record high of $489.88 per share. The stock dipped 0.89% in overnight trading, but the overall trajectory remains decidedly upward.
The optimism appears driven by ongoing excitement about Tesla's autonomous driving ambitions. CEO Elon Musk confirmed this week that the company has started testing robotaxis in Austin without a human "safety monitor" in the passenger seat. Apparently, investors are more focused on where the technology might go than on what regulators say about where it is right now.
It's a peculiar moment for Tesla: facing regulatory consequences for overpromising on autonomous driving capabilities while simultaneously watching its stock price surge on optimism about those very same capabilities. Sometimes the market works in mysterious ways.