Tesla under investigation by California attorney general

The California attorney general’s office is investigating Tesla, seeking information from customers and former employees about Autopilot safety issues and false advertising complaints, CNBC has learned.

Greg Wester, the owner of a 2018 Tesla Model 3, filed a complaint with the Federal Trade Commission in August 2022 regarding “phantom braking” — sudden, automatic braking by a car for no apparent reason — that he experienced when using the company’s driver assistance systems, or Autopilot, on the highway.

related investing news

Wester also told the FTC that he felt misled by Tesla after paying thousands of dollars for the company’s premium driver assistance option, marketed as Full Self Driving, or FSD, in the U.S.

By the second quarter of this year, an analyst with California Attorney General Rob Bonta’s office left Wester a voicemail seeking to interview him about the issues referenced in the complaint. Wester shared the voice message with CNBC, and provided a copy of the FTC’s automated response acknowledging receipt of his complaint.

CNBC confirmed that the person who called from the California AG’s office works as an analyst there. The government employee did not request confidentiality in the voicemail.

The California attorney general’s press office issued the following statement to CNBC on Wednesday: “To protect its integrity, we’re unable to comment on, even to confirm or deny, a potential or ongoing investigation.”

Phantom braking, a known issue that Tesla customers have complained about to federal agencies for years, can leave drivers susceptible to being rear-ended, among other dangers.

Musk has long promised investors and customers that features and functions would be added to Tesla vehicles over time, via over-the-air software updates, that would turn their cars into self-driving or autonomous vehicles. On Tesla’s second-quarter earnings call, Musk called himself “the boy who cried FSD.”

To this day, Tesla has not delivered a self-driving car and sells “level 2” systems, which require an attentive driver behind the wheel who is ready to steer or brake at any time.

“Tesla should offer customers the option to receive a full refund of Autopilot features if they are unsatisfied with the product,” Wester said in an interview. In purchasing FSD, he said, “we bought a full autonomy product and we received a driver monitoring product with partial autonomy.”

Wester isn’t the only Tesla customer to be contacted by analysts with the attorney general’s office after voicing safety and related concerns.

A former Tesla employee whose family owns a 2021 Model 3 with the FSD option was contacted by email in July 2023 by a senior legal analyst in the California AG’s consumer protection division. In the email, reviewed by CNBC, the analyst said she was seeking information from the person for an unspecified but active investigation into Tesla.

The former Tesla employee, whose identity is known to CNBC, asked to remain unnamed to protect his privacy. The person had previously voiced concerns about Autopilot and FSD safety issues at Tesla and publicly.

Tesla didn’t respond to CNBC’s request for comment. The FTC declined to comment.

It’s not unusual for law enforcement offices in the U.S. to obtain consumer complaints filed to the FTC via an online database called the Consumer Sentinel Network. According to the federal agency’s website, the network “gives law enforcement members access to reports submitted directly to the Federal Trade Commission by consumers” and to other reports shared by “data contributors.”

In its second-quarter financial filing, Tesla said it receives “requests for information from regulators and governmental authorities, such as the National Highway Traffic Safety Administration, the National Transportation Safety Board, the SEC, the Department of Justice (‘DOJ’) and various state, federal, and international agencies.”

While the company has previously identified “requests from the DOJ for documents related to Tesla’s Autopilot and FSD features,” Tesla has not disclosed that the California attorney general was investigating the company.

“Should the government decide to pursue an enforcement action, there exists the possibility of a material adverse impact on our business, results of operation, prospects, cash flows and financial position,” Tesla said in the filing.

California has been Tesla’s largest U.S. market for its electric vehicles and is home to the company’s first vehicle assembly plant, in Fremont. The company relocated its corporate headquarters to Austin, Texas, from Palo Alto, California, in 2021.

The California Department of Motor Vehicles has been investigating Tesla’s driver assistance systems for years and has formally accused the company of deceptive practices in marketing its Autopilot and FSD technology.

WATCH: Tesla’s limited product line makes pricing power key to growth