Tesla Forced To Reimburse Full Self-Driving After Arbitration Ruling

After an arbitrator found that Tesla had not fulfilled its promise, the company was forced to return a customer’s $10,000 Full Self-Driving (FSD) package. The case brings to light the automaker’s long-standing difficulties in delivering on its audacious promise of unsupervised self-driving. Since 2016, Tesla has maintained that all of its vehicles are equipped with the required hardware, with software updates to follow.

That promise is still elusive almost ten years later. Tesla has acknowledged that previous iterations of its vehicles are unable to achieve true self-driving capabilities and has made several hardware upgrades, going from HW2 to HW3 and now HW4. Elon Musk, the company’s CEO, acknowledged in early 2025 that even HW3 will require replacement, but he has not yet provided a detailed plan for retrofitting millions of owners.

The broken promise was personal to Marc Dobin, a devoted Tesla customer and Washington lawyer. As his wife’s mobility deteriorated, Dobin bought her FSD in the hopes that it would help her maintain her independence. But rather than an autonomous driver, they had to deal with a system that still requires full driver supervision and restricted access due to Tesla’s “safety score,” which was not mentioned in their purchase agreement.

Dobin took the dispute to arbitration, which Tesla’s contracts require of customers, after the company denied a refund. Equipped with legal expertise, Dobin successfully managed months of proceedings. In contrast, Tesla only produced one unprepared witness, a field technician who was not familiar with Dobin’s vehicle, contract, or logs. In the end, the arbitrator decided that the feature was “not functional, operational, or otherwise available,” siding with Dobin. Tesla was mandated to pay back taxes, the FSD fee, and arbitration fees totalling almost eight thousand dollars.

This ruling outlines a possible course of action for disgruntled clients, but it does not establish a precedent for other owners. Ironically, more owners may demand refunds as a result of Tesla’s insistence on arbitration, even as the company bears the high arbitration costs.

Even though its autonomous goals have not yet been realised, Tesla is still selling FSD for $8,000 to $15,000. The carmaker might have to do the right thing and provide refunds until it fulfils its driverless promise if it genuinely wants to win back people’s trust.