Tesla accused in South Korea of misleading Full Self-Driving buyers

Tesla probably faces a modest immediate financial cost, yet the complaint raises regulatory and reputational dangers for Full Self-Driving, the feature at the heart of its valuation. A cease-and-desist order or penalties in a rapidly expanding market would represent a setback. Refund demands would pose a larger problem if they spread to other countries that sell China-built vehicles. The row also shows how heavily Tesla's overseas software income relies on approval systems beyond its control, a point that matters as it seeks authorisation in Europe. Investors will be watching for swift action from the regulator and for comparable complaints in other markets.

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In South Korea, Tesla's rapid growth has rested on vehicles manufactured in China, and a consumer organisation claims it sold buyers self-driving software that they were never legally able to activate.

Summary:

• According to Reuters, a consumer group intends to lodge a complaint on Thursday accusing Tesla of misleading South Korean purchasers about Full Self-Driving
• Only around 20% of Teslas registered in South Korea, namely the US-made ones, may legally operate the software
• Last year, 99% of new Teslas sold in South Korea were built in China and did not qualify
• Before it shifted to a monthly subscription in August, Tesla charged about 9 million won (roughly $6,700) for the software
• The group wants a cease-and-desist order, fines and a referral to state investigators
• Earlier this year, the regulator had already launched an investigation into Tesla's advertising

A consumer advocacy organisation claims Tesla deceived tens of thousands of South Korean buyers by advertising Full Self-Driving, despite knowing that the software could not legally operate in most of the vehicles it sold in the country. Reuters reported that the group plans to file a complaint on Thursday.

Reuters, which has viewed the complaint that had not been reported before, says Citizens United for Consumer Sovereignty will request that the Korea Fair Trade Commission order a temporary halt to marketing the software for vehicles that cannot use it. The group will additionally pursue administrative fines and a referral to state investigators. Tesla did not answer requests for comment.

The location of vehicle manufacturing lies at the heart of the disagreement. Tesla Korea's country manager said at a parliamentary hearing last month that only around 20% of Teslas registered in South Korea are able to use the software. Those are vehicles built in the US, which satisfy American safety standards accepted under a free trade agreement. The majority of Teslas sold in South Korea come from China, where no equivalent arrangement is in place.

Company data provided to the National Assembly shows that Tesla has sold over 170,000 Shanghai-built cars in South Korea since 2023. In the previous year, 99% of new Teslas sold there were unable to use the software legally. Until it moved to a monthly subscription of around 150,000 won in August, Tesla had for years charged buyers a one-time sum of about 9 million won, or roughly $6,700.

According to the complaint, Tesla marketed the feature as imminent and published a demonstration video shot in South Korea, while failing to state clearly that just a small proportion of its vehicles were able to use it. The organisation's automotive lead said Tesla had generated significant revenue by selling an expensive system that many purchasers could not use in any circumstances.

Official scrutiny had already begun. A commission official said it launched an investigation into how Tesla advertised the software earlier this year and had received written replies from the company. According to the transport ministry, the software fails to satisfy local safety rules, among them a requirement that drivers keep their hands on the wheel. Tesla sought certification for China-made vehicles only in late October.

The complaint emerges as Tesla's South Korean sales are climbing. This year it surpassed BMW to become the country's leading imported car brand.