California’s top ride-hailing regulator said this week that Tesla’s service in the state is not an autonomous vehicle operation — it’s a chauffeur service with a limousine permit. Pat Tsen, Deputy Executive Director for Consumer Policy, Transportation, and Enforcement at the California Public Utilities Commission (CPUC), made the classification explicit during a March 24 appearance on the Driverless Digest podcast: “Tesla is not operating an autonomous vehicle service.” The comment came after the host mentioned taking a paid Tesla “robotaxi” ride in San Francisco — and Tsen corrected the framing on the spot.

The statement carries real regulatory weight. Tesla holds a charter party carrier (TCP) permit from the CPUC — the same authorization a limousine company holds to transport passengers in California. The person behind the wheel is legally the driver, not a safety monitor. And because Tesla’s system is classified as SAE Level 2, not Level 3, the automaker faces zero autonomous vehicle reporting requirements under California law.

California Defines Autonomous Vehicles at SAE Level 3 and Above

California’s regulatory framework draws a hard line at SAE Level 3. At that threshold, the onboard system can navigate designated road conditions within a defined operational domain on its own. Tesla’s Full Self-Driving (FSD) Supervised system sits at Level 2, which by definition requires a licensed human driver to remain attentive and ready to intervene at all times. Under the CPUC’s rules, that human is the driver — not a safety backup — regardless of whether they are actively touching the controls.

Tsen compared Tesla’s California operation directly to a passenger using FSD on the Uber platform: supervised driver-assist in a commercial ride context. She confirmed Tesla is “not subject to the autonomous vehicle program reporting requirements” that apply to actual AV operators like Waymo and Zoox — companies that must report per-trip location data, vehicle miles traveled, and stoppage events (instances where a vehicle is stuck for more than two minutes or requires remote intervention). Tesla reports none of that to the CPUC.

Tesla Acknowledged Its Own Level 2 Classification in February — Then Fought to Keep the “Robotaxi” Label

This is not new information to Tesla. In a February 13 filing with the CPUC in Rulemaking 25-08-013, the company acknowledged in writing that its ride-hailing service in both Austin and the Bay Area relies on in-car human drivers and remotely located operators, running on an SAE Level 2 system. Those remote operators must hold U.S. driver’s licenses and undergo background checks and drug testing. In the same filing, Tesla argued it should retain the right to keep marketing the service using terms like “driverless,” “self-driving,” and “Robotaxi.” The CPUC filing makes the contradiction explicit: Tesla told regulators its vehicles are not autonomous and require human drivers, while simultaneously fighting for the right to market the service as a “Robotaxi.”

Waymo, by contrast, operates fully driverless vehicles across multiple cities and completes more than 450,000 paid rides per week under full CPUC reporting requirements. Tesla’s Austin operation, nine months in, runs roughly 42 vehicles with below 20% availability — almost entirely human-supervised. The service reported 14 crashes since its mid-2025 launch, including five additional incidents in January 2026 alone.

NHTSA’s FSD Investigation Is One Step From a Recall

The regulatory backdrop extends beyond California. On March 18, 2026, the National Highway Traffic Safety Administration (NHTSA) upgraded its FSD visibility probe — originally opened as PE24031 in October 2024 — to Engineering Analysis EA26002. That upgrade covers an estimated 3,203,754 vehicles across the 2016–2026 Model S and X, 2017–2026 Model 3, 2020–2026 Model Y, and 2023–2026 Cybertruck. An Engineering Analysis is the final investigative step before NHTSA can mandate a recall.

The core finding: FSD’s degradation detection system — designed to recognize when cameras are impaired by sun glare, fog, or dust and alert the driver — failed to do so in nine documented crashes. One of those crashes was fatal. Tesla released a software update to address the degradation detection problem, but NHTSA’s review found the update would have changed the outcome in only three of the nine incidents. NHTSA also concluded that Tesla’s internal data limitations may have led to under-reporting of related crashes. This is the third concurrent federal investigation into FSD; a separate probe (PE25012) covers 2.88 million vehicles over more than 50 traffic violations including red-light running.

On the Cybercab front, NHTSA recently proposed amending Federal Motor Vehicle Safety Standard (FMVSS) No. 102 — the rule governing transmission shift position indicators — to exempt fully autonomous vehicles without steering wheels or pedals from the display requirement. The amendment’s comment period runs through April 15, 2026. It removes a procedural hurdle for the Cybercab, which Tesla says will enter production at Gigafactory Texas in April 2026 at a starting price under $30,000. Musk has described early production volume as “agonizingly slow.”

EVXL’s Take

What Tsen said on the Driverless Digest podcast is something California regulators have been signaling for over a year. We reported in July 2025 that Tesla held only initial CPUC and DMV permits, with spokespersons from both agencies noting no further applications had been filed. When Tesla quietly launched its Bay Area service last summer with a safety driver in every car, the app’s own terms read: “If your ride is taking place in California, it is being conducted with a safety driver using FSD (Supervised).” The regulator is now just saying out loud what the terms of service already admitted.

The devil’s advocate case for Tesla is real: the company is collecting data at commercial scale in a way no simulated test environment replicates, and that data advantage could eventually produce a genuinely autonomous system. Musk claimed in December 2025 that FSD Unsupervised was “pretty much solved.” But NHTSA’s March 2026 Engineering Analysis — covering 3.2 million vehicles and anchored by a fatal crash in reduced visibility — is a direct regulatory rebuttal of that claim. A company whose degradation detection system misses nine out of nine crashes hasn’t solved the hard part of autonomy.

Tesla will not receive a CPUC autonomous vehicle permit for its Bay Area operation before the end of 2026. The company hasn’t applied for one. Calling a supervised Level 2 service a “Robotaxi” while fighting to block transparency requirements is a regulatory and legal exposure Tesla is accumulating, not resolving — and at some point, either NHTSA or a California court will force a reckoning.

Frequently Asked Questions

What permit does Tesla hold to operate its ride-hailing service in California?

Tesla holds a Transportation Charter Party (TCP) permit — a charter party carrier authorization the same as any limousine company in California. It is not an autonomous vehicle permit. Tesla has not applied for an AV permit from the CPUC or the California DMV.

Why does the SAE level matter for California regulation?

California defines autonomous vehicles as SAE Level 3 or higher — systems capable of navigating specified conditions without human input. Tesla’s FSD Supervised is Level 2, which legally requires a human driver to monitor the vehicle at all times. That classification means Tesla avoids all AV safety reporting requirements that apply to Waymo and Zoox.

What is NHTSA’s current investigation status on Tesla FSD?

NHTSA upgraded its FSD low-visibility investigation to Engineering Analysis EA26002 on March 18, 2026, covering approximately 3.2 million vehicles. This is the final investigative stage before NHTSA can mandate a recall. Nine crashes, including one fatality, are linked to the probe.

What is the FMVSS No. 102 amendment and how does it affect the Cybercab?

NHTSA has proposed removing the transmission shift position display requirement from Federal Motor Vehicle Safety Standard No. 102 for fully autonomous vehicles without manual controls. The amendment directly benefits the Cybercab, which has no steering wheel or pedals, by eliminating a regulatory hurdle tied to human-driver assumptions. The public comment period closes April 15, 2026.

EVXL uses automated tools to support research and source retrieval. All reporting and editorial perspectives are by Haye Kesteloo.