Elon Musk announced during Tesla’s quarterly earnings call that millions of Tesla owners will need to undergo hardware upgrades to utilize a future iteration of the company’s Full Self-Driving (FSD) software, a revelation that contradicts years of guarantees from Musk and Tesla that such upgrades would not be necessary.
This disclosure raises potential legal implications as many customers bought their vehicles under the assumption that they were just one software update away from achieving full autonomy. Musk clarified that vehicles equipped with the third version of Tesla’s driver-assistance technology, referred to as “Hardware 3,” will require new computer systems and cameras to support the advanced software.
The necessity for these modifications has prompted Tesla to consider establishing “micro-factories” in major urban areas to alleviate the strain on its service centers, which might become overwhelmed by the volume of upgrades required. Musk noted, “If it’s done just at the service center, it is extremely slow to do so, and inefficient,” emphasizing the need for a production-like approach to manage the upgrades effectively.
For years, Tesla owners who possess Hardware 3 vehicles have pressed the company for clarity on whether their cars would be capable of running this upgraded version of FSD, which has yet to be released or demonstrated. This group of vehicles, sold between 2019 and 2023, is now facing uncertainty about their future capabilities. Musk admitted that by January 2025, it became clear that Hardware 3 would not support more advanced versions of FSD.
“I think the honest answer is that we’re going to have to upgrade people’s Hardware 3 computer for those that have bought Full Self-Driving,” Musk stated, acknowledging the difficulty and inconvenience this would create for many owners.
Interestingly, just six months prior, Tesla’s Chief Financial Officer Vaibhav Taneja had expressed optimism about the potential to still make Hardware 3 compatible, stating during an October 2025 briefing that the company “has not completely given up on HW3.” However, Musk was firm in his recent assertions, declaring that while slightly more advanced versions of FSD software would be available for Hardware 3 owners, a full transition to unsupervised driving would require upgraded hardware.
“Hardware 3 simply does not have the capability to achieve unsupervised FSD,” Musk emphasized, marking a significant shift in the company’s trajectory and its relationship with existing customers. As discussions of legal repercussions loom, Tesla faces a challenging future balancing customer expectations against technological realities.
