California Reviewing Tesla’s ‘Full Self-Driving’ Feature After Company Clarifies Its Limits

California regulators continue to review an update to Tesla’s Autopilot feature that enables vehicles with a $10,000 “Full Self-Driving” option to do things like steer themselves on city streets. Tesla says that, despite the name, the software doesn’t offer a level of autonomous capability that requires state approval.

The matter came to light when communications between Tesla and California’s Department of Motor Vehicles were made public recently by self-described legal transparency website PlainSite. The state agency became concerned about Tesla’s plan to add “FSD” capability to Autopilot in December 2019, after a tweet by CEO Elon Musk. It told the company: “As you are aware, the deployment of autonomously driven vehicles on public roads in California requires a permit to deploy. At this time Tesla does not have a permit to deploy.”

Tesla lawyer Eric Williams responded in a Nov. 20, 2020, letter that cars operating with FSD’s City Streets mode weren’t autonomous, but instead were using an advanced driver-assistance system, or ADAS, operating at SAE Level 2. (That designation, created by the Society of Automotive Engineers, means a human driver must be ready to take the wheel at all times.) “Currently neither Autopilot nor FSD Capability is an autonomous system, and currently no comprising feature, whether singularly or collectively, is autonomous or makes our vehicles autonomous. This includes the limited pilot release of City Streets.”

The matter isn’t yet resolved. “The DMV continues to gather information from Tesla on its beta release of Navigate on Autopilot City Streets feature–including any expansion of the program and features,” the agency told Forbes by email on Tuesday. “Regardless of the level of vehicle autonomy, DMV emphasizes the need for manufacturers to inform customers and drivers about the intended use, capabilities, and limitations of their technology.”

The agency declined a request to discuss whether the state is concerned the name Tesla uses for its ADAS feature, Full Self-Driving, is misleading for consumers. Tesla, which has no media relations team, didn’t respond to a request for comment on the DMV’s ongoing review.

Under California law, it’s illegal for an auto manufacturer to falsely promote a vehicle as autonomous if it lacks that capability, according to section 228.28 of the state’s motor vehicle codes.

Another revelation from communications between the company and its home state is that Musk’s goal of eventually enabling Tesla owners and the company to make money turning its electric vehicles into robotaxis doesn’t seem to be possible with the current iteration of Auto Pilot with Full Self-Driving. To do so, the system must achieve at least SAE Level 4 capability–along the lines of what companies such as Waymo, Cruise, Argo AI and Zoox are focussed developing–in which a human driver doesn’t need to take control of a vehicle.

Tesla lawyer Williams provided no guidance on when that would happen in his comments to the state. “Please note that Tesla’s development of true autonomous features (SAE Levels 3+) will follow our iterative process (development, validation, early release, etc.) and any such features will not be released to the general public until we have fully validated them and received any required regulatory permits or approvals,” he wrote in a Dec. 14, 2020 letter.

Musk told analysts and investors during the company’s fourth-quarter results call on Jan. 27, 2021 that the ability of Teslas to become money-generating robotaxis was a way to justify a massive jump in the value of the company’s shares over the past year.

“If Tesla’s ships, let’s say, hypothetically, $50 billion or $60 billion worth of vehicles, and those vehicles become full self-driving and can be used as robotaxis, the utility increases from an average of 12 hours a week to potentially an average of 60 hours a week if they’re capable of serving as robotaxi. So that’s like roughly a five times increase in utility,” he said. “Let’s just assume that the car becomes twice as useful as–not five times as useful, but merely twice as useful–that would be a doubling again of the revenue of the company, which is almost entirely gross margin. So it would mean, it would be like if you made $50 billion worth of cars, it will be like having $50 billion of incremental profit basically from that because it’s just software.”

Musk said in 2019 that Tesla might have a million vehicles with the necessary software to operate as part a robotaxi service by the end of 2020, though that didn’t happen. It remains unclear when it might be possible.

California releases data on all companies testing autonomous vehicles in the state in its annual disengagement report. Alphabet’s Waymo and GM-backed Cruise regularly post the most test miles for autonomous fleets in California, and newcomers such as Apple are increasing their totals. Tesla reported no test miles in California for 2020, when the latest results came out last month.

“California’s autonomous vehicle regulations define an autonomous vehicle as any vehicle equipped with technology that has the capability of performing the dynamic driving task without the active physical control or monitoring of a human operator,” told Forbes. “Vehicles equipped with one or more systems that enhance safety or provide driver assistance but are not capable of driving or operating the vehicle without the active physical control or monitoring of a human are not considered autonomous.”