It came down to the wire, but the standoff between Tesla and the California Department of Motor Vehicles (DMV) has officially ended. As of February 18, 2026, the DMV has rescinded its threat to suspend Tesla’s dealer license for 30 days. For a moment there, it looked like the electric vehicle giant might actually be barred from selling cars in its most critical U.S. market.
So, how did they dodge the bullet? They didn’t win in court—they changed the product. To satisfy regulators who have spent years arguing that Tesla’s marketing is deceptive, the company has fundamentally altered what comes standard on its vehicles. If you walk into a showroom today to buy a Model 3 or Model Y, the feature we’ve all known as “Autopilot” is effectively gone from the spec sheet.
What exactly did the California DMV decide?
The resolution announced on February 18 comes after a tense few months. Back in December 2025, Administrative Law Judge Juliet Cox ruled that Tesla’s use of the terms “Autopilot” and “Full Self-Driving” was deceptive. She recommended a 30-day suspension of Tesla’s license to sell vehicles in California. That is a massive penalty for a company that relies heavily on West Coast sales volume.
However, the DMV offered an off-ramp: a 90-day window to “cure” the violation. Steve Gordon, the DMV Director, noted that Tesla could take “simple steps” to resolve the issue—steps that other autonomous vehicle companies had already taken. Tesla took the hint. By removing the controversial branding and clarifying the limitations of the technology, the DMV deemed Tesla’s corrective actions sufficient to call off the suspension.
How has the driving experience changed for new buyers?
This is where the regulatory battle hits your wallet. To comply with the demand that they stop overstating their cars’ abilities, Tesla discontinued “Basic Autopilot” as a standard feature on new vehicles in North America as of January 23, 2026.
Previously, buying a Tesla meant you got basic lane-centering and adaptive cruise control for free. That is no longer the case. New Model 3 and Model Y vehicles now ship with only “Traffic-Aware Cruise Control” (TACC) as the standard offering. TACC will keep your speed and distance from the car ahead, but it won’t steer for you. The “Autosteer” feature—the part that actually keeps the car centered in the lane—is now locked behind a paywall.
This significantly changes the value proposition for budget-conscious buyers. If you look at competitors like Honda or Toyota, lane-centering technology is almost always standard on their base models. Tesla has effectively removed a feature to satisfy a legal definition, making their entry-level experience less capable than it was a year ago.
Why did Tesla switch to a subscription-only model?
Alongside the removal of Basic Autopilot, Tesla has overhauled how it sells its advanced driver-assistance software. On February 14, 2026, the company eliminated the option to purchase Full Self-Driving (FSD) for an upfront cost of $8,000. Instead, the company has shifted exclusively to a $99/month subscription model.
This move does two things. First, it lowers the barrier to entry for the feature that now contains Autosteer. Instead of dropping $8,000 at checkout, you pay a monthly fee. Second, it enforces the new branding: “Full Self-Driving (Supervised).” By forcing users into a subscription labeled “Supervised,” Tesla effectively admits that the human driver is still responsible, which aligns with the DMV’s requirements to stop marketing the cars as fully autonomous.
What was the legal argument behind the suspension threat?
The root of this entire saga goes back to a 2021 investigation by the California DMV. The core accusation was that Tesla falsely advertised its vehicles as autonomous. While Tesla’s legal team argued that the company “has never misled consumers,” the courts disagreed.
In her December 2025 ruling, Administrative Law Judge Juliet Cox found the term “Full Self-Driving” to be “actually, unambiguously false and counterfactual.” The legal system determined that you cannot call a product “self-driving” if it requires constant human supervision. While Tesla has recently deployed ‘Robotaxi’ Model Y units in Austin for testing without safety drivers, those are specific test environments. For the consumer cars sold in California, the judge ruled that the marketing simply didn’t match reality.
The Real Story
While this looks like a regulatory loss for Tesla, it may actually be a financial win in disguise. By stripping standard Autosteer from the base package, Tesla has solved a major legal headache while simultaneously creating a powerful funnel for its $99/month subscription. In the past, you could be perfectly happy with free Basic Autopilot; now, if you want lane-centering—a feature standard on a Toyota Corolla—you must become a subscriber. It degrades the hardware value proposition but stabilizes Tesla’s recurring revenue stream, turning a regulatory slap on the wrist into a reason to upsell every single customer.
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