Tesla Ordered to Refund Full Self-Driving Fee After Failing to Deliver Functionality

Tesla has been compelled to refund a $10,000 Full Self-Driving (FSD) purchase to a customer following arbitration that determined the automaker failed to provide the promised product. The decision underscores growing scrutiny of Tesla's FSD program and its continued inability to meet advertised capabilities—particularly the promise of unsupervised self-driving.

Tesla's Full Self-Driving Promise: A History of Missed Expectations

Since 2016, Tesla has claimed that all vehicles it produced were equipped with hardware capable of supporting full, unsupervised self-driving through future software updates. The company heavily marketed its FSD package—priced between $8,000 and $15,000 over the years—as a means to eventually achieve autonomous driving via over-the-air updates.

Yet nearly a decade later, Tesla has not delivered on that promise. Instead, the company has repeatedly revised the required hardware, replacing its original HW2 and HW2.5 computers with newer HW3 units. Even so, in early 2025, CEO Elon Musk publicly admitted that HW3 would also be insufficient to achieve true autonomous capability, suggesting future hardware upgrades would be necessary. As of mid-2025, Tesla has not announced any comprehensive plan for retrofitting vehicles with updated systems.

While new Tesla models now ship with HW4 hardware, which began rolling out in 2023–2024, data suggests that the latest software combined with HW4 achieves only limited autonomy—averaging just 500 miles between critical disengagements. This falls far short of unsupervised autonomy and raises serious questions about whether any of the current configurations are capable of fulfilling Tesla’s long-standing claims.

Mounting Customer Frustration and Legal Challenges

As Tesla continues to delay and restructure its FSD roadmap, frustration is mounting among customers who paid thousands of dollars for a feature that remains in a perpetual beta state. One such customer, Marc Dobin from Washington, chose to challenge Tesla’s marketing and delivery practices through arbitration—a legal avenue Tesla mandates in its purchase agreements, effectively preventing class-action suits or traditional court challenges.

Dobin, a seasoned attorney with extensive arbitration experience, purchased a Tesla Model Y in 2021, paying $10,000 for the FSD package. For him and his wife—who was experiencing declining mobility—FSD represented not just an innovation, but a potential lifeline for independent transportation.

But the reality didn’t match Tesla’s sales pitch. Dobin found that access to the FSD Beta was gated behind an opaque “Safety Score” system that Tesla had not disclosed during the purchase process. Worse still, even when activated, FSD required constant driver supervision—contradicting the company’s promise of a self-driving experience.

Arbitration Exposes Gaps in Tesla's Documentation and Strategy

Undeterred by Tesla’s contractual barriers, Dobin initiated arbitration. After nearly a year, a remote evidentiary hearing was held via Zoom. Tesla presented just one witness—a field technician who admitted he had no direct knowledge of the vehicle’s equipment, had not reviewed Dobin’s driving logs, and was unfamiliar with the FSD configuration in the vehicle. The technician had no communication with sales staff or knowledge of the contractual language used during the purchase.

While Tesla had two attorneys present—including external counsel—neither provided testimony or effectively supported the technician’s statements. Dobin described the hearing as a stark example of corporate unpreparedness:

"He was a service technician, not a lawyer or salesperson. Tesla set him up to be a human punching bag—unprepared to answer key questions and forced to defend a system he clearly didn’t understand."

The arbitrator ultimately sided with Dobin, writing in the decision:

“The evidence is persuasive that the feature was not functional, operational, or otherwise available.”

As a result, Tesla was ordered to refund the full $10,000 FSD cost plus applicable taxes and cover nearly $8,000 in arbitration fees—costs the company is obligated to pay due to its own arbitration clauses.

Implications for Tesla and Other FSD Buyers

Tesla’s loss in arbitration could set an important precedent, especially as more customers become disillusioned with the FSD experience. With millions of vehicles equipped with underperforming hardware and a vague roadmap for future retrofits, Tesla faces mounting liability—both reputational and financial.

Many customers have already paid significant premiums for FSD under the belief that the feature would one day evolve into true autonomy. Yet progress has been slow and non-transparent, leading some to seek refunds, while others consider legal action or public criticism.

Customer Brent Teal commented:

“I bought a Model 3 mainly for FSD. Tesla wouldn’t let me transfer it to a new car, then offered transfers just three months after I sold mine. I’m legally blind now. A real self-driving car would’ve changed my life.”

Tesla’s Position: A Costly Refusal to Adapt?

Despite the mounting dissatisfaction, Tesla continues to defend FSD in arbitration rather than offer blanket refunds or voluntary buybacks. This strategy may be short-sighted. As critics point out, Tesla loses far more by contesting these claims than it would by offering customer-first resolutions.

Dobin’s case highlights the risks of Tesla’s current approach. The company reportedly spent more on arbitration than the refund itself—assigning two attorneys to contest a $10,000 reimbursement. This raises the question: why not simply refund customers when the product fails to meet expectations?

Conclusion: A Defining Moment for Tesla’s FSD Future

Tesla’s handling of its Full Self-Driving program is reaching a critical inflection point. Between outdated hardware, unresolved upgrade plans, and mounting legal challenges, the company is facing a credibility crisis. Customers like Marc Dobin are no longer content with vague promises and beta trials—they’re demanding accountability and tangible results.

Unless Tesla takes decisive action—offering refunds, clarifying retrofit plans, or ceasing the sale of FSD until it meets a meaningful standard of autonomy—it risks eroding the trust of its core customer base and attracting even more legal challenges.

Author: Lay Wen

Recommended Reading: Tesla News