Key Points
Tesla is facing another lawsuit regarding its self-driving claims.
The California DMV is trying to suspend Tesla’s dealer license for 30 days.
The EV maker has also launched a new round of buyer incentives.
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Tesla (NASDAQ: TSLA) sure can’t catch a break right now. The electric vehicle (EV) maker is dealing with declining deliveries in major markets and facing consumer backlash after CEO Elon Musk’s dive into politics.
Despite the ongoing issues facing Tesla, the automaker was banking on a solid third quarter for deliveries due to demand being pulled forward from the inevitable end of the federal incentive for EVs. Unfortunately, the newest potential problem could put a major kink in third-quarter deliveries as the automaker might not be able to sell EVs in California for a month. Here’s what’s going on.
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License revoked?
There’s the potential that the automaker could lose its license to sell vehicles in California due to a false-advertising lawsuit brought by the state’s Department of Motor Vehicles (DMV). The department wants to suspend its sales in the nation’s largest EV market for 30 days because it has been in a legal dispute with the company over the advertising language for its Autopilot and full self-driving (FSD) capability.
This suit has been brewing for some time. The state DMV started investigating Tesla for possible misleading advertising in 2021 and then sent an official inquiry to the automaker roughly a year later.
Now, things are taking another step forward with a court holding a five-day hearing on the case this week and with the DMV pushing to get the manufacturer’s dealer license suspended for a full month, which would deal a devastating blow to the company’s third quarter. California is easily the most valuable EV market in the U.S.
Tesla is all in
This would be a huge setback because management was essentially preparing to go all in during the third quarter, which was expected to be the last strong quarter for EV sales in the near term, as the markets slowly digest tariffs, rising prices, and the removal of the federal tax credit for EVs.
In fact, the company just launched a long list of new discounts and incentives to boost deliveries of its EVs in the U.S. All new vehicles carry a $7,500 lease incentive with delivery by Sept. 30; $1,000 off for members of the military, first responders, students, and teachers; a free one-month trial of supervised FSD; a free transfer of supervised FSD from a buyer’s current Tesla; and a trial of its Premium Connectivity for 30 days for the Model 3 and Y and one year for the Model S, X, and Cybertruck.
Tesla’s Cybertruck. Image source: Tesla.
Tesla even took it a step further with added discounts on specific models that can be combined with incentives for all models. Management is certainly banking on the third quarter to move some product.
What it all means
Tesla hasn’t been catching many breaks in 2025, and investors would be wise to pay close attention to its lawsuit in California, which could deal a devastating blow to the company’s third-quarter deliveries and financials. If Tesla manages to avoid having its sellers license suspended, the company’s incentives and discounts should drive a stronger quarter, which would finally be a bit of good news for investors.
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Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
