Tesla is under investigation by the Korea Fair Trade Commission following allegations that it sold Full Self-Driving software to customers with ineligible China-manufactured vehicles. While a Seoul court recently dismissed a related consumer refund lawsuit, the regulator is now reviewing whether the company's marketing practices were deceptive.
Tesla is facing heightened regulatory scrutiny in South Korea as the Korea Fair Trade Commission (KFTC) investigates the company’s marketing practices for its Full Self-Driving (FSD) software. The regulator is examining allegations that Tesla sold the premium software to customers despite knowing that their vehicles, largely manufactured in China, were not legally certified to use the feature in the country.
The core of the investigation concerns whether the company provided misleading information to consumers. Data indicates that approximately 99% of new Tesla vehicles sold in South Korea last year were produced in China, and these units lacked the necessary safety certification from local transport authorities to enable FSD at the time of sale. Only vehicles built in the United States, which account for roughly 20% of the total Tesla fleet in the nation, met the specific safety standards required under local trade and regulatory agreements to utilize the software.
In a recent legal development, Tesla secured a win in a separate, private matter. On October 29, 2026, the Seoul Central District Court dismissed a lawsuit brought by 89 vehicle owners who sought refunds for the FSD software. The court ruled that Tesla did not breach its contractual obligations, noting that the FSD package does not guarantee full autonomous driving capabilities. Despite this court victory, the KFTC probe remains a significant, separate regulatory challenge that focuses on potential consumer deception rather than contract law.
The environment around the technology has become more complex due to unauthorized modifications. South Korean police recently took action against approximately 80 Tesla owners who used illicit, third-party hardware devices to bypass software restrictions and force-enable FSD features on their vehicles. Authorities have seized 21 of these devices, highlighting the intense consumer interest in the software despite the ongoing regulatory and certification hurdles.
For investors, the outcome of the KFTC investigation is the primary monitorable. If the regulator determines that Tesla engaged in deceptive marketing, the company could face administrative fines, strict mandates to change its advertising, or potential cease-and-desist orders regarding the sale of FSD in the region. The firm has recently begun the formal certification process for its China-manufactured vehicles, but the lag between sales and regulatory compliance remains a point of friction that could impact consumer trust and long-term brand positioning in the South Korean market.