Autonomous Driving News: Tesla Sues, BMW Bails

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Sometimes, two news stories appear on the same day that are related but are so diametrically opposed to each other that it is hard to believe they describe events in the same world. First up, Tesla has sued the state of California. Why? Because the California Office of Administrative Hearings had the audacity to suggest last year the company’s use of terms like “Autopilot” and “Full Self Driving” in its marketing constituted false advertising.

Second, BMW announced it is suspending efforts to develop Level 3 autonomous driving capability. Why are the two stories related? Because Tesla lit the fuse on the autonomous driving rocket over a decade ago when it first introduced Autopilot.

Tesla & California

The legal contest in California comes two months after the state’s Office of Administrative Hearings determined the DMV could temporarily suspend the company’s licenses to manufacture or sell cars in the state for 30 days. On that matter, the DMV gave Tesla wide latitude to bring itself into compliance and did not immediately suspend Tesla’s ability to produce or sell cars. Then, on February 17, 2026, the DMV decided Tesla had taken appropriate steps to bring itself into compliance and determined that no license suspension was required.

But Tesla being Tesla was embarrassed, aggrieved, humiliated, and incensed by the actions of the state of California, and so it has elected to sue the state, alleging it “wrongfully and baselessly” labeled Tesla a “false advertiser” for its prior use of the terms Autopilot and Full Self Driving.

CNBC reports that Tesla now uses the brand name “Full Self-Driving (Supervised)” to describe its partially automated driver assistance system, and it sells it only on a subscription basis. In the past, Tesla packaged partially automated driving features in tiers labeled Autopilot, Enhanced Autopilot, and Full Self Driving and sold the systems for an additional fee in addition to the sale price of its cars. Over the years, some features, like Autopilot, were included for free while more advanced features could be obtained at additional cost.

Tesla’s owner manuals specify that drivers should not use FSD (Supervised) features without paying attention to the road. In filings with California Office of Administrative Hearings, lawyers for the state wrote that Tesla’s marketing for Autopilot and Full Self Driving falsely suggested the cars were capable of operating autonomously.

Tesla’s attorneys claim the DMV never proved consumers in California were confused about whether its cars were safe to drive without a human at the wheel. They argued that when Tesla employed those brand names, “It was impossible to buy a Tesla equipped with either Autopilot or Full Self Driving Capability, or to use any of their associated features, without seeing clear and repeated statements that they do not make the vehicle autonomous.”

That’s the claim. But in a trial in Florida last year, a jury awarded $243 million in actual and punitive damages in a suit involving a Tesla that blasted through a stop sign at a T intersection before striking a parked car on the other side of the road. The collision killed one person and left another with serious permanent injuries.

The driver said he believed the car would stop for any obviously dangerous conditions while he searched for his missing phone. The jury clearly rejected similar arguments by Tesla’s attorneys in that case.

In a separate class action lawsuit winding its way through California courts, customers who purchased FSD expecting their cars to be upgraded into robotaxi-ready vehicles over time are asking for their money back. Elon Musk is quick to accuse others of what he calls “lawfare,” but there is perhaps no one on earth more prone to using the courts to gain an advantage than he is.

BMW & Mercedes End Level 3 Programs

In related news, BMW announced this week it has stopped its efforts to develop Level 3 autonomous driving technology for its 7 Series vehicles. According to Germany’s Automobilwoche, the BMW 7 Series and Mercedes S-Class “were pioneers in highly automated driving at Level 3 on the international stage. That’s now history, at least for the time being. At the presentation of the new S-Class a few days ago, [Mercedes] announced that it would be removing Level 3 from its product range. Now BMW is taking a similar approach.”

Cost is a significant factor. Both systems relied on expensive Lidar sensors, and even then the systems were only able to be used on motorways at relatively low speeds but not at normal cruising speeds.

Going forward, BMW said it will focus on Level 2 systems that are significantly cheaper. The current Level 3 technology added €6,000 to the price of the cars. In the future, the company will offer drivers the much simpler Level 2 system used in the latest iX3, which is available for a much more affordable €1,450.

The system available in the iX3 is known as Motorway Assistant and allows drivers to take their hands off the steering wheel at speeds of up to 130 km/h, though they must remain attentive and ready to intervene — hands-off but eyes-on, in other words. It incorporates lane centering and automatic lane changing with a confirmatory glance from the driver.

The package also includes City Assistant, which enables stopping at red lights and automatic acceleration when the light turns green. Further driver assistance functions for complex urban driving situations are set to be introduced via over-the-air software updates at a later date. BMW has received DCAS certification for the system, which allows it to be deployed in 60 countries.

When the new S-Class is introduced later this year, it will offer MB.Drive Assist Pro, a Level 2++ driver assistance and navigation system designed to enable partially automated door-to-door driving, similar to Tesla’s FSD (Supervised).

Who Wins, Who Loses?

So, here we have two giants of the auto industry effectively saying Level 3 is a bridge too far for them, largely because the costs outweighs the benefits. Meanwhile, Tesla is continuing its single minded pursuit of autonomous driving and aggressively challenging anyone who dares oppose it. The contrast could not be more stark.

Another equally stark contrast is between Tesla — which insists it can make robotaxis perform without Lidar — and Waymo — which makes multiple Lidar sensors an integral part of its self-driving systems. As of yesterday, Waymo is now operating commercially in 10 cities. The takeaway seems to be that, once Musk has made up his mind to do something, there is no power on the face of the Earth that can get him to change his mind.

Thomas Edison was known for being rather single minded, but when people questioned his ideas, he didn’t sue them, he just calmly carried on with whatever his current quest happened to be. Musk is more like Howard Hughes, a well respected pioneer who slowly slipped into irrelevance. We will soon know more about how the newly added Cybercab performs in the real world without human minders. Musk is promising miracles. “We’ll see,” said the Zen master.