Tesla stock moved higher on Tuesday, reclaiming the $400 level, as investors reacted to reports that the company is suing California over its treatment of Tesla’s driver-assistance marketing.
Tesla stock was up about 2% at $406.46 in early trading. The move was in line with the broader market, as the S&P 500 was up 0.5%.
The move followed a report by CNBC that Tesla has filed a lawsuit against the state of California over a decision finding that the company had used false advertising in promoting its Autopilot and Full Self-Driving systems.
Dispute over autopilot and Full Self-Driving
California regulators had previously accused Tesla of misleading consumers about the capabilities of its driver-assistance software, including Autopilot and Full Self-Driving, commonly referred to as FSD.
Tesla’s systems are regularly upgraded through software updates, and the company says FSD can handle most driving tasks.
However, the technology still requires constant human supervision.
The original false advertising finding carried the potential penalty of temporarily stripping Tesla of its ability to manufacture and sell vehicles in the state.
That risk eased after the California Department of Motor Vehicles said it was satisfied with changes Tesla had made to its marketing practices.
Despite that resolution, Tesla appears to be seeking to have the false advertising label fully removed through legal action.
European sales continue to decline
Tesla is also facing mounting challenges in Europe, where sales have continued to weaken.
Data released Tuesday by the European Automobile Manufacturers Association showed that Tesla’s new vehicle registrations fell to 8,075 units in January, down 17% from a year earlier.
This marked the 13th consecutive month of declining sales.
Tesla’s market share across the European Union, Britain, Switzerland, Norway, and Iceland slipped to 0.8%, compared with 1% in the same month last year.
The company has faced strong competition from Chinese manufacturers in the region and has also struggled with reputational challenges linked to Musk’s political activity.
Musk spent nearly $300 million supporting the re-election of Donald Trump, and later led efforts to cut federal agencies.
Protests were held at Tesla dealerships across Europe during his involvement with the administration.
Waymo expands Robotaxi operations
Competition in autonomous driving also intensified on Tuesday after Waymo, owned by Alphabet, expanded its robotaxi service.
Waymo said it opened its service to some public passengers in Dallas, Houston, San Antonio, and Orlando, bringing its total operating footprint to 10 US cities.
The company is seeking to build loyalty and address public concerns about driverless vehicles.
According to a 2025 survey by the American Automobile Association, six in 10 US drivers remain fearful of autonomous cars.
Waymo’s expansion comes as rivals, including Tesla, Amazon-owned Zoox, and startups Waabi and Nuro, work to commercialise their own robotaxi services.
Overseas competitors such as Baidu-owned Apollo Go and WeRide are also gaining market share.
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