Tesla’s shares, which had been scaling successive record highs, are facing a new challenge from regulators in a crucial U.S. market. The company’s marketing claims for its driver-assistance technology have been formally deemed misleading by California’s Department of Motor Vehicles (DMV), prompting a threat of serious consequences. As the stock price retreated, investors are weighing whether this represents a fundamental business risk or merely a procedural obstacle.
A Critical Sixty-Day Window
The immediate catalyst for the sell-off was a ruling by a California judge, who affirmed that Tesla’s use of the terms “Autopilot” and “Full Self-Driving” (FSD) violates state law regarding deceptive marketing. Regulatory officials have now issued a 60-day ultimatum for the electric vehicle maker to revise its promotional language.
The potential penalty is severe: a 30-day suspension of Tesla’s license to sell vehicles in California. Such a move would deliver a significant operational blow, given the state’s importance to Tesla’s global volume. California accounted for more than 135,000 new vehicle registrations in the first nine months of 2025 alone. In a response on the social media platform X, Tesla asserted that sales would continue without interruption.
Profit-Taking Meets Regulatory Scrutiny
The stock, which had recently been buoyed by speculation surrounding autonomous robotaxis, came under noticeable pressure. It closed yesterday’s session at 398.20 euros. Market observers note that the decline also reflects classic profit-taking behavior. With a price-to-earnings ratio exceeding 300, the equity’s valuation is exceptionally rich, leaving it vulnerable to any negative developments.
Should investors sell immediately? Or is it worth buying Tesla?
Goldman Sachs analyst Mark Delaney offered a measured perspective on the situation. Maintaining his “Neutral” rating on the stock, Delaney anticipates that Tesla will comply with the order and adjust its marketing terminology within the allotted timeframe to avoid any disruption to its operations. He does not foresee a material impact on the company’s underlying business.
Strategic Initiatives Continue Amidst Headwinds
Despite this regulatory friction, Tesla continues to advance its long-term strategic projects. In Austin, Texas, the company commenced testing of driverless robotaxis on public roads starting December 15—a milestone that had originally fueled the stock’s recent rally. Separately, reports indicate planned investments totaling $1.2 billion into German battery production facilities, with operations slated to begin from 2027.
Attention now turns to two pressing deadlines. First, Tesla must present a solution to the California marketing dispute by mid-February 2026. Second, the company faces a year-end delivery push, as new U.S. tax regulations require customer orders to be fulfilled by December 31, 2025.
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