Elon Musk admitted during Tesla’s April 22, 2026 earnings call that millions of vehicles with Hardware 3 cannot run unsupervised Full Self-Driving software.
He stated that owners of these cars will demand both a new computer and new cameras to access future versions of FSD that do not require human supervision.
Musk said the upgrade process would be too slow and inefficient if handled only at service centers, prompting Tesla to plan microfactories in major metropolitan areas.
Tesla will offer discounted trade-ins and upgrade paths for Hardware 3 vehicles
For customers who purchased FSD, Tesla is providing a discounted trade-in option for vehicles equipped with AI4 hardware, according to Musk.
The company will too allow owners to upgrade their existing cars by replacing the computer and cameras to reach Hardware 4 capability.
Musk emphasized that converting all Hardware 3 vehicles to Hardware 4 makes long-term sense for enabling robotaxi fleet participation and unsupervised FSD.
Hardware 3 limitations were acknowledged after years of customer inquiries
Musk noted that Tesla owners with Hardware 3 vehicles had repeatedly asked for clarity on whether their cars could achieve advanced FSD through software alone.
He conceded in January 2025 that Hardware 3 was insufficient for more advanced FSD versions, a position he reiterated in the April 2026 call.
The admission follows Tesla’s sales of Hardware 3-equipped vehicles between 2019 and 2023, many of which were sold with the promise of imminent self-driving capability via software updates.
What does Musk signify by unsupervised FSD?
Unsupervised FSD refers to Full Self-Driving software that operates without requiring human driver intervention or monitoring, a version Tesla has not yet released or proven functional.
Why are microfactories needed for the upgrade process?
Musk explained that performing hardware upgrades at existing service centers would be extremely slow and inefficient, necessitating mini production lines in urban areas to scale the effort.