It sounds like they are using a technicaltity to cut down on street racing.
I see your point, that he could, in theory, remove the ID stickers. But in CA, don’t they check various VIN numbers as part of the vehicle inspection?
I don’t think they do regular inspections in CA, except at title transfer. And anyway, VIN is not at issue here, they’re saying if an individual component in the car has no serial (not has a stolen one, but just a missing one), it justifies seizing the entire car.