Tesla shares plunge 4.62% as regulatory scrutiny over Autopilot branding intensifies ahead of potential California sales ban.

Tesla Inc. shares plunged 4.6175% in pre-market trading on December 18, 2025, as regulatory scrutiny over its Autopilot branding intensified, sparking investor concerns ahead of a potential sales ban in California.

The California Department of Motor Vehicles (DMV) warned Tesla it could suspend car sales in the state for 30 days if it fails to address claims that its “Autopilot” and “Full Self-Driving” features constitute false advertising. The DMV argued that Tesla’s marketing misleads consumers by implying its driver-assistance systems operate as fully autonomous vehicles, despite requiring active human supervision. The agency granted Tesla 90 days to comply or face enforcement actions, including a temporary halt to sales or manufacturing licenses.

Regulatory challenges follow a Miami jury’s August ruling that Tesla was partially liable in a fatal Autopilot-related crash, awarding $240 million in damages. Tesla has contested the decision and maintains that no consumer complaints were filed over its branding. However, the company faces mounting legal and safety inquiries, including a federal probe into Autopilot’s effectiveness and lawsuits alleging Elon Musk exaggerated the readiness of its robotaxi program to inflate stock value.

California, a critical market for Tesla’s sales and innovation hub, represents 11% of the company’s global deliveries in 2025. Analysts note the DMV’s actions could delay Tesla’s AI-driven growth narrative, particularly as competitors like Waymo advance autonomous vehicle deployments. The stock’s sharp decline reflects heightened uncertainty over regulatory hurdles and the pace of autonomous technology adoption.