Over the years, Elon Musk has been known for making extravagant promises about the capabilities of Tesla cars, and for falling short.

California has finally called him out, via a lawsuit accusing Tesla of leading buyers to believe that its vehicles can operate autonomously — as self-driving cars — which they "could not and cannot do." That amounts to false advertising, the Department of Motor Vehicles asserts.

The DMV is seeking to bar Tesla from selling cars in the state for at least 30 days. A five-day hearing in the case began Monday in Oakland before a DMV administrative law judge.

A suspension of car sales in California would be a serious problem for Tesla, given that the state has generally accounted for some 30% of its U.S. domestic sales; the U.S. has accounted for roughly half of worldwide sales.

Through June this year, Tesla sales have fallen more than 18% in California compared with the same period a year ago, at least in part because of Musk's increasingly visible engagement with right-wing politics, his online embrace of racist and antisemitic viewpoints, and the rampage through federal agencies conducted by his minions at DOGE.

Tesla's EV market share in the state fell to 45.3% in the first half from 53.4% in the first half of 2024.

Tesla's second-quarter results, released after the stock market's close Wednesday, bore no reason for joy among investors. The company reported a 12% revenue decline compared with the same quarter in 2024, which it attributed to a decline in auto deliveries, and a 42% decline in operating profit.

Tesla has had to fight accusations of false claims about its cars' autonomous capabilities before. Indeed, lists of overly optimistic or overconfident forecasts by Musk of Tesla sales and technological capabilities are common on the web. Not a few investors have learned to build in a standard deflation factor to bring these projections closer to reality or plausibility.

"Within two years," Musk said in 2016, "you'll be able to summon your car from across the country. It will meet you wherever your phone is … and it will just automatically charge itself along the entire journey." In 2020, he told an engineering conference that he was "confident that we will have the basic functionality for Level 5 autonomy complete this year."

Level 5, as defined by the Society of Automotive Engineers, is the highest self-driving category, allowing a vehicle to operate without a human driver ever taking control and in all conditions. No manufacturer has yet turned out a Level 5 vehicle, and some engineers doubt it will ever be possible. The most advanced autonomous vehicles today are Level 2 or 3, in which human drivers must take control all or some of the time.

A video posted on Tesla's website in 2016 featured a car purportedly stopping at a red light and obeying other traffic signals, with the caption, "The person in the driver's seat is only there for legal reasons. He is not doing anything. The car is driving itself." A Tesla engineer later testified that the car followed a mapped route and that it did not have the capabilities shown in the video.

A Tesla shareholder lawsuit filed in 2023 cited more than 20 false or misleading statements Musk or Tesla made about the stage of its self-driving technology, its safety and its capabilities, dating back to 2019.

During a podcast that year, for example, Musk claimed that by the end of the year a Tesla car "will be able to find you in a parking lot, pick you up, take you all the way to your destination without an intervention ... I'm certain of that. That is not a question mark." The California authorities assert that that's still not possible, in 2025.

Tesla's defense in the shareholder case included the argument that statements like those were "mere corporate puffery, vague statements of optimism." They shouldn't be part of a lawsuit, the company said, because "professional investors, and most amateur investors as well, know how to devalue the optimism of corporate executives."

We've heard the "puffery" defense before. Typically, businesses use it to defend against charges that its advertising claims are deceptive, on the grounds that no one believes advertisements anyway.

Wells Fargo used it in an attempt to fend off a 2018 shareholder lawsuit alleging that the bank's claim that it was working to "restore trust" among its customers after a string of scandals was false. The bank's response was that such statements were "puffery" — so generic that they couldn't "cause a reasonable investor to rely upon them." Wells Fargo eventually settled the lawsuit for $300 million, without admitting wrongdoing.

A federal judge dismissed the shareholder lawsuit last year, finding that some of the statements by Tesla and Musk were indeed mere "puffery" and others were either true or otherwise irrelevant. The plaintiffs, which are public pension funds, have appealed the dismissal.

California authorities filed their case against Tesla in July 2022. Their accusation has four main components. They argue that by labeling its autonomous driving functions "Autopilot" and "Full Self-Driving Capability," the company has implied to customers that the cars can drive themselves.

The state also cited two snippets of language on the Tesla website. One stated, "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." The other said, in part, "All you will need to do is get in and tell your car where to go. ... Your Tesla will figure out the optimal route, navigating urban streets, complex intersections and freeways."

Tesla didn't reply to my request for a comment. But in its trial brief, filed July 17, the company asserted that its Autopilot and Full Self-Driving descriptions have always been qualified by warnings to users that the available features "require active driver supervision and do not make the vehicle autonomous." It said that more than a year ago it dropped the label "Full Self-Driving Capability," or FSDC, and replaced it with "Full Self-Driving (Supervised)."

As for the language the state cited, Tesla said that the phrases appeared only on "an aspirational webpage designed to recruit engineers ... to develop future FSDC features," and weren't aimed at buyers — in other words, they were not meant to be factual claims. In any case, Tesla said, that webpage "no longer exists." Its web address now steers users to the webpage for Full Self-Driving (Supervised).

Tesla also contended that there is no "direct evidence of consumer confusion" over the autonomy of its vehicles. The DMV, it said, merely concluded that "consumers may interpret Autopilot of FSDC terminology as being synonymous" with autonomous operation, but that's not enough for a false advertising claim. (Emphasis in the original.)

It's true that Tesla's self-driving features haven't been successfully blamed in court for producing injuries or fatalities; Tesla has settled at least three cases involving claims that its self-driving systems were responsible for fatal accidents. One case involved the death of an Apple engineer whose Tesla struck a highway barrier while he was playing a video game with Autopilot allegedly activated. The settlement terms were undisclosed.

Tesla's record could change, however, with the outcome of a trial currently taking place in federal court in Miami. The case was brought by the families of two victims who died when a Tesla with Autopilot engaged slammed into an SUV near where they were standing. One died and the other suffered serious injuries. The driver of the Tesla had taken his eyes off the road to search for a cellphone he had dropped, and the vehicle continued through an intersection before striking the SUV.

In certifying the case for trial, federal Judge Beth Bloom ruled that "a reasonable jury could find that Tesla acted in reckless disregard of human life for the sake of developing their product and maximizing profit." She also cleared the plaintiffs to seek punitive damages if the jury finds against Tesla.

These legal developments come at a sensitive moment for Tesla. Sales are down not only in California, but also in much of the world. In the European Union, Tesla sales fell 45.2% this year through May, compared with a year earlier.

Tesla's sales of regulatory credits to automakers that don't exclusively market EVs but have needed to meet federal fleet emission standards are likely to evaporate; the budget bill recently signed by President Trump eliminates the financial penalties for automakers that don't meet those standards, removing their incentive to buy credits from Tesla.

Sales of those credits came to $2.76 billion last year, nearly 40% of Tesla's reported profit for the year. Without the credit sales, which came to $595 million in the first quarter of this year, which ended March 31, Tesla would have reported a loss for the quarter instead of a $420-million profit. Tesla is scheduled to report second-quarter financial results next week.

The company faces challenges other than Musk's waning public esteem and its sales decline. As I reported in March, the company faces ever-stiffer secular headwinds, including competition from legacy automakers moving into the electric vehicle market.

Its reputation for cutting-edge technology is eroding; the company's largest Chinese rival, BYD, recently announced a new charging technology it says can add about 250 miles of range to an EV in five minutes — even less than the time it takes to fill a conventional car's gas tank to the same level. Tesla says its top-of-the-line superchargers need 15 minutes to add 200 miles of charge.

Tesla's product lineup is looking increasingly antique. Its clunky and widely disdained Cybertruck is beginning to look like a lemon. In March, regulators ordered a recall of all the trucks — the eighth recall since its introduction in 2023 — this time to address the tendency of metal trims along both sides to get ripped off at highway speeds because the glue that attaches them fails.

Sales have been sinking: Kelley Blue Book reported earlier this month that Tesla sold only 4,306 Cybertrucks in the second quarter this year, down by nearly one-third from the second quarter of 2024, and down by 50% in the first half of 2025 compared with last year's first half.

Tesla's stock has long been buoyed by Musk's reputation as a farsighted entrepreneur — based in part on his enticing visions of Tesla's prospects. Those are beginning to fray, and the full dimensions of the wear-and-tear may not yet be fully evident.

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