Is Tesla ending FSD direct sales to avoid CA’s false advertising ban?

Tesla abruptly announced this week that it would no longer sell its Full Self-Driving software package through an upfront, one-time fee, and instead would move to a subscription only model, starting on February 14th.

That just so happens to be the same day that a court ruling goes into effect that could stop Tesla from selling cars in California unless it changes the way it advertises autonomy. Is it just a coincidence, or is that the reason for the shift?

Tesla has been selling level 2 driver assist software since 2016, which it calls “Full Self-Driving” (FSD), despite that this software did not (and still does not) make its cars capable of driving themselves.

Tesla also provides software under the name “Autopilot,” another term that evokes some level of autonomy, though perhaps not as explicitly as the aforementioned FSD. Tesla long held the position that this word is meant to evoke airplane-like systems that still require a pilot, but can just do most of the work for them.

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Both names have attracted much consternation over the years, becoming more absurd as each of Tesla’s predicted deadlines for the advent of full autonomy blow by.

The consternation recently turned to action, though, as a California judge finally put the kibosh on Tesla’s false advertising of these features, ruling that the company deceptively marketed both of them and stating that it must stop doing so within 60 days.

That decision was on December 17th, to go into effect on February 14, 2026. Which happens to be the same day Tesla is now planning to move to a subscription only model (as noticed by a commenter on CleanTechnica). Not only that, but the deadline for Tesla to file a petition to reconsider the ruling is January 15, the day after Tesla made its announcement that it’s stopping upfront sales (we have not seen whether Tesla filed that petition or not).

Given these coinciding timelines, this naturally brings up the question: is this Tesla’s attempt to change its advertising to avoid California’s ruling?

Is the CA ruling really the reason here?

Temporally it seems to make sense, but on looking into the ruling, we’re not sure how this would help.

The ruling did state that the FSD title is “actually, unambiguously false and counterfactual,” but later in the order, the court specifically focused on “use of…the Autopilot name to describe ADAS features that do not cause respondent’s vehicles to operate at SAE Level 3, SAE Level 4, or SAE Level 5.”

Strangely, it does not specifically order Tesla to stop using the name “Full Self-Driving,” despite having found that term misleading.

Further, Tesla’s plan to move to subscription only doesn’t change anything about its marketing of FSD or Autopilot. Presumably, the company would still call the system by the same name, would still market it, and would still sell it, just by a subscription model rather than an upfront sales model. The court didn’t contend with the upfront sales model, it contended with Tesla’s deceptive marketing of the system.

So we don’t think this move specifically is going to do anything to satisfy the court or the California DMV.

However, it could be related to other overall changes in how Tesla treats FSD and Autopilot, and all of these could be rolled out at the same time. Tesla hasn’t given specifics of the change yet, outside of a short tweet by CEO Elon Musk (inbetween bouts of him being a twitter-addicted white supremacist), so we don’t know the full story yet, but we wouldn’t be surprised if there was some sort of change in how Tesla treats the separation between Autopilot and FSD, as the company has done before.

Or is it because of Musk’s stock award?

Another theory is that the change has something to do with Musk’s ridiculous $1 trillion compensation package. That package is split into 12 tranches with various operational and financial requirements, each of which would individually pay the bad CEO more money than any other CEO in history.

Some of these tranches will be tough to hit, while others are quite easy, even taking into account the current poor sales trajectory that Musk has led the company to. And one of the easier tranches would require 10 million+ FSD subscriptions.

Some have theorized that this is an attempt to hit that tranch – however, that tranch counts both one-time purchases and active monthly subscriptions. And given that subscriptions can be cancelled and one-time purchases can’t, then that suggests that Musk would still prefer one-time purchases (although it is much easier to sell a monthly subscription with a lower fee which could be the goal, but in that case, why not continue to offer both?).

So it’s likely not related to that, and there’s no particular reason to make that change right now, since Tesla doesn’t have nearly enough cars on the road to reach that subscription number anyway – both because of the ~4 million cars that don’t have the right hardware even for current the current level 2 FSD version, and because of the low current FSD take rate (and no, free trial subscriptions won’t count for the stock award).

Or maybe to solve FSD transfer/hardware issues, once and for all?

Finally, it could be a way of putting to bed the ridiculous situation that Tesla has gotten itself in of having to honor FSD transfers.

It turns out, when you sell a piece of software for up to $15,000, constantly promise to deliver it by the end of the next year, and then never deliver it, customers get a little miffed about that (miffed enough to file class action lawsuits).

And even the patient ones especially get miffed if they have owned a car for 8 years now, meaning it may be time for an upgrade, and Tesla says that they can’t move that software license to another car or otherwise get restitution for it.

For this reason, Tesla has repeatedly offered transfers of FSD software licenses to new vehicles, but has only ever done so on a temporary basis, pretending to be exercising some sort of noblesse oblige in deigning to allow people to maybe eventually get a chance to use software they bought, more than a decade after buying it.

A purely subscription model would solve this problem going forward, as people would just subscribe to whatever current capabilities the system has, rather than purchasing a promise of future abilities.

That does seem better in a lot of ways, because it takes liabilities off the table for Tesla, allows for more stable “software-as-a-service” revenue that every company seems to be chasing these days (to the chagrin of many customers), and allows more informed decisions by consumers, without having to loan the company thousands of dollars to work on software that it has heretofore failed to deliver.

But this all still leaves the question open: why is this being done on the exact day that the ruling goes into effect? We think there’s probably another shoe that will drop, and we’ll see a bigger reorganizing of what FSD means, around then.

Or maybe it’s just a coincidence.

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