The Professor was looking forward to getting a new US driver’s license. After moving from the East Coast to teach at the University of California, it became pertinent for the 38-year old engineer and scientist to have his own driver’s license again. The coming school year would be different from the last, after all, and with face-to-face classes likely starting again, it was important for the Professor to have the capability to drive the family’s Tesla Model 3 when needed.
Having extensive driving experience overseas before moving to the United States, the Tesla owner (name witheld as requested) was fairly optimistic that he could pass the Department of Motor Vehicles’ standards. His family certainly looked forward to it, so his wife, who also teaches at the University of California, and their two kids — a 4-year-old and a 3-month old baby — headed over to the Santa Ana DMV. Unfortunately for the Professor, he made a grave mistake.
He drove a Tesla.
Driving Tests from Hell
It is no stretch to state that California is the heart of the US’ electric vehicle transition. It’s home to Tesla’s headquarters and the company’s Fremont Factory, where vehicles like the Model 3 and the Model Y are produced. The Professor was then surprised when the DMV examiner, after what appeared to be an uneventful drive, told him that he had failed his driving test. As related to Teslarati, the DMV examiner reportedly informed the Tesla owner that he failed because the “technology in the car was not off.” When asked for more explanation, the examiner explained that the Model 3’s acceleration should have been on “Chill Mode” and the steering settings in “Comfort.”
This was inconvenient, but the Professor figured that he should probably just try again. The Model 3 owner ultimately opted to try his hand at another test in the LA DMV, especially since Teslas are extremely common in Los Angeles. For the second time, the family of four headed over to the LA DMV in their Model 3 for another test. The Professor then drove away with his examiner, but not before ensuring that the Model 3 was in Chill Mode and its steering was set in Comfort. But just like his previous attempt, the DMV examiner informed the Tesla owner that he had failed because of the Model 3’s “automatic engage.” Explaining further, the examiner stated that she could feel the brakes even when the physical brake pedal was not being pressed.
This set off alarms in the Professor and his wife, as regenerative braking is a feature that is very common among electric vehicles. It is also not in any way connected to a Model 3’s automated features. As they addressed their concerns with the DMV, the manager of the LA office told the Model 3 owners that there was no way for Teslas to disable their automated features. When the Tesla owners asked where she got her information from, the manager stated that she heard it from a customer who visited the DMV a few weeks prior. The manager then extended an offer, telling the Tesla owner that he could retake the exam that same day if he could rent a traditional car.
This was an unexpected turn for the family, but they were eventually able to secure a Toyota Camry from a rental car company an hour away. But upon presenting the vehicle to the DMV, the LA office rejected the Camry since it was not under the Professor’s name. Ultimately, the Tesla owner was not allowed to take his driving test in the rental car, though he was given the option of renting one from the LA DMV office instead for $140, $40 more than the Camry that the family had initially rented. Unfortunately for the Professor, he was given a failing score once more, despite the DMV examiner acknowledging that he seemed to have a lot of experience driving cars.
DMV Policies and Customer Advice
In a later message, the Professor’s wife stated that her husband would most definitely try to get his driver’s license once more, though they would probably wait some time before trying again. The last three tries were quite exhausting, and by the third driving test, the Model 3 owner stated that some DMV staff were already irate. This was not that unusual, of course, considering that the DMV is one of America’s least-liked agencies. It was just quite surprising that in the first two tests, it was the Model 3’s features that caused the examiner to fail the Tesla owner.
-
In a response to a Teslarati inquiry about the Model 3 owners’ experience, the CA DMV Public Affairs Office confirmed that there is no policy that prevents customers from taking their driving test in a Tesla. The office added that while the DMV currently has no specific criteria for features like regenerative braking in EVs, it is working to ensure that examiners have an understanding of the function and how it impacts driving. That being said, the agency advised that those who wish to take their driving test in a Tesla should speak to a manager first to avoid issues.
“In the event (that) a customer has questions about taking a driving test in a particular vehicle, they should ask to speak with a manager before the test. DMV employees who give behind-the-wheel tests receive updated training as necessary,” the DMV Public Affairs Office noted.
It should be noted that California is arguably the US state that is friendliest to electric vehicles. The state still offers clean vehicle rebates, and there is still a Zero Emission Vehicle (ZEV) mandate for automakers. It is then no surprise that Teslas are very popular in the state. In 2015, California accounted for 43% of Tesla’s new vehicle registrations, as per data from IHS Markit. This percentage has since decreased as Tesla started selling its cars to more territories — but its California stake is still no joke. In 2020 alone, Tesla still sold 37% of its vehicles in California, despite the pandemic and the company no longer having any access to the $7,500 federal tax credit enjoyed by competitors like the Ford Mustang Mach-E and the Volkswagen ID.4.
Insights from CA’s Clean Air Protectors
The California Air Resources Board (CARB), which is charged with protecting the public from the harmful effects of air pollution and developing programs to fight climate change, is among the agencies that are helping push the transition to sustainable transportation. With this in mind, it seemed appropriate to get the agency’s take on the Tesla Model 3 owners’ experience with the Santa Ana and LA DMV. After all, it would be quite challenging to fully adopt electric vehicles in California if some driving examiners or DMV offices were still unfamiliar with how EVs work, or their features for that matter.
CARB Communications Specialist John Swanton informed Teslarati that while driving tests are not CARB’s area of responsibility, the agency could work together with the DMV if there are widespread issues that could impede the greater goals of California’s transition to Zero-Emission vehicles. That being said, Swanton remarked that driver-assist technologies are becoming more and more common in modern cars, and they are widely accepted as features that enhance safety.
“While the driver’s license test is not our area of responsibility, we can say that we are not aware of any serious concerns that DMV has with the routine features found in a very wide range of vehicles equipped with driver-assistance technologies. As you are probably aware, these are in use in both EV and combustion-powered vehicles, and are widely accepted to enhance vehicle safety. These systems not only meet state requirements; they are fully certified for use nationwide by the US National Highway Traffic Safety Administration,” Swanton said.
The CARB Communications Specialist further stated that specific features like regenerative braking have long been proven to be very efficient, driver-operated controls that have been utilized since the early days of hybrid vehicles like the Toyota Prius. In this light, at least, it appears that the DMV examiner’s statements about the Model 3’s regenerative braking being an automated feature seems misinformed at best or biased at worst. “Their operation is not unlike the use of an automatic transmission. So it’s safe to say that these are not autonomous features, but rather simply part of modern automobile controls. I think this complaint may be a situation with an individual examiner that DMV management will need to speak to or clarify policy,” Swanton remarked.
Behind the Times
There is something ironic about the idea of a Tesla driver in California failing a driving test because of the electric vehicle’s basic functions. Numerous driving schools across the globe, after all, are already embracing electric vehicles fully. Los Angeles-based Drivers Ed Direct currently operates an all-electrified fleet of cars for its students. Defensive Driving School, which was founded in 1945, actually offers a “specialty course” on Model 3s called “The Tesla Experience.” These programs suggest that driving schools across the country are already aware that sustainable vehicles are inevitable, and it is in everyone’s best interest to ensure that drivers of the future are fully acquainted with the features and behavior of electric cars.
And it’s not just the United States either. In Germany, a country famous for its mastery of carmaking, schools like Die Fahrschule have made it their mission to ensure that the next generation of drivers is properly prepared for the era of electric vehicles. In an interview with noted EV advocate Ove Kröger, one of the German driving school’s instructors, Alexander Erler, stated that there are actually advantages to teaching in an EV like a Model 3, since the vehicles provide a calm atmosphere. Remarkably, Erler noted that the presence of Model 3s in the school’s fleet actually helped dispel misinformation about electric vehicles, especially when younger drivers take their EV-skeptical parents along for their lessons.
-
Even oil-rich Dubai is no different. Electric vehicles are still a niche product in the Middle Eastern city, but prominent driving schools like Emirates Driving Institute (EDI) are already investing in electric vehicles. The school purchased a Model X to be part of its premium driving fleet in 2018, and since then, the vehicle has been received well. In a conversation with Teslarati, EDI Marketing Executive Disha Bhatia explained that the addition of electric vehicles to the school’s fleet is fully supported by the government. This is a big vote of confidence in EVs, since Dubai mandates all drivers to attend a formal driving school before attempting a driving test.
“It becomes important for them to also know that if tomorrow, electric cars are the future, then how would driving be any different than that of regular cars? So when (the students) learn on Teslas, they would understand the differences between a normal car versus an electric car. However, they also need to understand that driving is the same. They still need to focus on the same points… the same (focus on safety)… We’ve received great responses from a lot of our customers who are very interested to drive in a Tesla, and they’re very happy to get their licenses,” she said.
So what exactly happened in the case of the Model 3 owner? It would be very difficult to determine exactly what caused the examiners to fail the Tesla owner, though it appears that a lack of proper information is the prominent culprit. Teslas are ultimately cars, after all, and they serve the same purpose as regular vehicles. They just happen to be more advanced, and in more ways than one, safer, than traditional vehicles. With this in mind, it seems to be a bad idea to be misinformed about Teslas, especially since the vehicles are practically everywhere in the state.
Don’t hesitate to contact us with news tips. Just send a message to tips@teslarati.com to give us a heads up.
Elon Musk
SpaceX’s next trillion dollar bet has nothing to do with rockets, Musk tells staff
Elon Musk told SpaceX staff AI revenue will soon dwarf rockets and Starlink combined entirely.
Elon Musk told SpaceX employees this week that artificial intelligence, not rockets, will soon carry the company’s revenue. In a roughly 29 minute internal address posted on SpaceX’s X account on Tuesday, Musk said AI revenue will pass every other line of business at SpaceX “probably in September” and pull further ahead by the fourth quarter.
The numbers he gave are specific. SpaceX currently runs 1.4 gigawatts of AI compute capacity. Musk wants that at 10 gigawatts by the end of 2027, a jump he tied directly to revenue: “if we bring 10GW of AI online by the end of next year, it will be $300 billion to $500 billion a year in revenue.” He called those “big numbers,” which undersells a projection larger than what most countries produce in a year.
We made rockets reusable and are rebuilding the internet in space. The next challenge: making life multiplanetary and understanding the true nature of the universe
Watch @ElonMusk deliver a company update to @SpaceX employees pic.twitter.com/5c8rxoCQfu
— SpaceX (@SpaceX) August 11, 2026
Musk went further on where AI fits into SpaceX’s future. “Probably in four or five years, AI will be 99% of the value of SpaceX,” he told staff, adding that digital intelligence would eventually run “a trillion times” ahead of biological intelligence as computing scales. He tied that growth to the company’s founding mission, telling employees “we must win on AI, because the future is overwhelmingly AI and robots,” with the payoff meant to help fund Starship and a Mars program that increasingly runs through Terafab, the joint Tesla, SpaceX and xAI chip plant.
Elon Musk launches TERAFAB: The $25B Tesla-SpaceXAI chip factory that will rewire the AI industry
None of this is entirely new territory. SpaceX told investors much the same story during its first earnings call as a public company on August 4, where Musk moved the company’s $1 trillion revenue target up a year to 2030 and said Starlink could someday carry a majority of the world’s internet. What the all hands video adds is a hard deadline and a specific power figure Musk had not given publicly before, along with a franker pitch to his own workforce that AI, not launch cadence, is now the thing SpaceX is betting its future on.
The AI revenue itself is not coming from SpaceX training its own models. It is largely Starlink acting as the network layer for xAI’s workloads, plus SpaceX renting out compute capacity directly, the same approach behind the roughly $16 billion the company spent on AI infrastructure in a single quarter.
Musk closed the video with a pitch aimed at recruiting and retention rather than investors, telling employees that anyone who helps SpaceX win the AI race will eventually get the chance to go to the moon or Mars themselves. Whether SpaceX can turn 1.4 gigawatts into 10 in seventeen months is the more immediate question, and one that will show up in quarterly numbers well before anyone leaves Earth.
In a new note to investors on Tuesday, Morgan Stanley analyst Andrew Percoco said that Tesla has one big financial question to answer for investors regarding its Robotaxi rollout, Full Self-Driving software, and Optimus.
Percoco said in the note that, for the most part, investors are still very positive about the direction the company is headed. However, there are some things the firm would like to see, and they have to do with financials.
Tesla (TSLA) Q2 2026 earnings results: miss on EPS, beat on revenue
Tesla bulls are more than convinced that the company’s Full Self-Driving software is proof it can develop physical AI. Financially, however, there are still some questions, especially on elevated spending, which CEO Elon Musk said would occur as the company works to roll out Robotaxi faster and continue developing its Optimus robot.
The latter two are where Tesla will have to prove progress to investors, as Percoco writes that both projects “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Percoco said the second quarter earnings call did not change his long-term thesis of where Tesla is positioned in the AI race, which is out in front. However, there are concerns that weaker gross margins and higher R&D spend will stress financials, and that has “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
Additionally, Robotaxi still needs to be proven with more operation in existing cities while maintaining safety but improving how many rides it gives in any given time, he said. For Optimus, Percoco wrote that he is “still looking for evidence beyond commentary around SOP.”
Morgan Stanley put Percoco in charge of covering Tesla after long-time analyst Adam Jonas transitioned to the automotive side.
Currently, Morgan Stanley has a $415 price target on Tesla and a ‘Hold’ rating on the stock. It is trading at around $330 at the time of publication, which was 2:30 P.M. on the East Coast.
SpaceX’s massive investment in AI will make it a big winner, Argus Research said after the company’s successful earnings call last week.
The firm also upgraded shares to a Buy from Hold and set a $160 price target.
SpaceX (NASDAQ: SPCX) is currently recovering from its heavy AI infrastructure investments, as it spent nearly $16 billion in Q2 alone. The company did this primarily by monetizing high-demand GPU compute capacity at a much faster pace than traditional data center economics would suggest.
Company CFO Bret Johnsen said that SpaceX would be able to pay back anything on new deployments within a year.
There are plenty of ways the company can do this:
Leasing excess compute capacity through contracts
SpaceX has already built Colossus and Colossus II, largely for its own model training. However, much of that capacity is already rented out to third parties. It already has major deals with Anthropic, Google, and Reflection AI. These partnerships are adding billions per month to SpaceX’s spreadsheet.
High utilization driven by industry-wide scarcity
The demand for advanced AI training and inference capacity continues to exceed what is available for use. SpaceX can fill new racks quickly after they come online, so the capital deployed converts into revenue with minimal idle time.
Additionally, management and outside observers have described the new compute capital as behaving more like a cost-of-goods-sold than traditional multi-year capex, especially because of this rapid monetization pattern.
Capacity has already scaled from ~0.4 GW a year to 1.4 GW annually by the end of Q2. There are targets of more than 2 GW by year-end.
High incremental margins on the rental business once capacity is online
GPU cloud providers often operate at strong gross margins. SpaceX can monetize capacity that was already partially built or can be added efficiently. This means that incremental EBITDA margins on the rental revenue are usually high. This accelerates cash recovery relative to the gross capital outlay.
Parallel monetization of its own AI software and applications
Beyond pure infrastructure rental, SpaceX also generates revenue from Grok through subscriptions and usage, from X through ads, data, and other related services, enterprise APIs, and the planned integration of the Cursor coding tools acquisition.
These application layers ride on the same compute infrastructure and provide additional high-margin streams that could offset build-out costs. AI-segment revenue overall rose sharply to about $2.6 billion in Q2, according to Motley Fool. This was driven primarily by the infrastructure contracts, but the software side is also partially responsible.
Efficient, large-scale deployment and vertical integration advantages
SpaceX has emphasized the rapid construction of power and cooling infrastructure and favorable cost-per-megawatt economics relative to industry benchmarks in some disclosures.
Combined with its ability to scale capacity aggressively and the fact that many contracts start generating revenue within months of capacity coming online, the effective payback compresses dramatically compared with more conventional multi-year data-center projects.
SpaceX’s dominant near-term recovery path will turn the AI clusters into a hyperscale-style compute rental business for other leading AI companies while still using a portion for internal models.
SpaceX’s next trillion dollar bet has nothing to do with rockets, Musk tells staff
Tesla has one big financial question to answer for investors: Morgan Stanley
