Tesla Inc. (TSLA) drops 4.62% as California DMV demands revised autonomous driving branding

Tesla Inc. (NASDAQ: TSLA) fell 4.6175% in pre-market trading on December 18, 2025, as regulatory scrutiny over its autonomous driving branding intensified. The decline followed a California Department of Motor Vehicles (DMV) decision requiring Tesla to revise its use of terms like “Autopilot” and “Full Self-Driving,” which regulators deemed misleading for describing driver-assistance features that lack full autonomy. The DMV granted Tesla 60 days to comply or face a 30-day sales suspension in the state.

Investors reacted to the regulatory risk amid broader market weakness in AI-driven sectors. Tesla’s stock had surged to record highs earlier in the week, fueled by optimism around its robotaxi ambitions, but the California ruling underscored ongoing challenges in aligning marketing claims with regulatory standards.

Analysts noted that the stock’s valuation remains tied to long-term AI and robotics potential, even as core electric vehicle production and delivery metrics face persistent scrutiny.

The ruling marks a renewed escalation in Tesla’s years-long legal and regulatory battles over driver-assistance technology. A 2023 administrative law judge’s recommendation for a 30-day license suspension was previously stayed, but the latest decision signals heightened enforcement risks. With California representing a key market for EV adoption, any disruption could amplify financial and reputational pressure on the company as it navigates competing priorities between regulatory compliance and technological innovation.