July 22, 2025 - Tesla Faces Potential California Sales Ban

This is the Telemetry Transportation Daily for July 22, 2025 and I'm Sam Abuelsamid, Vice President of Market Research for Telemetry.

As the end of federal clean vehicle tax credits rapidly approaches at the end of September, manufacturers of electric vehicles are hoping to entice customers to buy now to save $7,500. One of the brands most affected by this is Tesla, which has already seen a 20% drop in sales in the first half of 2025 due in part to the political activities of CEO Elon Musk. As this deadline approaches, Tesla also faces the potential of a 30-day suspension of its license to sell vehicles in California, a state that accounts for one-third of US EV sales. 

In 2022, California passed a law prohibiting manufacturers from advertising its vehicles as self-driving or autonomous if that is not actually the case. China recently imposed similar regulations, although they are national, not just at a state level. The DMV, which regulates the licensing of automotive retailers in the state, has been investigating Tesla's claims for several years, and this week, it is facing off against Tesla in court. For nearly a decade, Tesla CEO Elon Musk has been making claims about the forthcoming self-driving capabilities of the company's products. Despite the fact that the instructions to owners state that the driver is responsible and must watch the road and keep hands on the wheel during operation, branding a level 2 advanced driver assist system as full self-driving and regularly promoting online videos of owners violating the policies seems to be a clear violation of the law. Since Tesla only sells directly to consumers the company is licensed retailer. 

Even if the DMV does win and the court suspends Tesla's sales license, it would only apply in California. In other states where direct sales are prohibited, Tesla still sells online and arranges for vehicle deliveries in neighboring states where it is allowed to sell. The same is likely to happen if they are barred from sales in California. The inconvenience of having to travel to a neighboring state to pick up a new car means that Tesla would likely see a substantial drop in sales during the ban, but sales are unlikely to go to zero. 

Thanks for listening.