Elon Musk acknowledged in January that Tesla will need to replace Hardware 3 in vehicles owned by customers who purchased the Full Self-Driving package — a driver-assistance system marketed as capable of autonomous driving. He described the situation as both “painful” and “difficult.”
What was promised in 2016 is now being revised in 2025 — and not without surprises. Musk clarified that millions of Teslas built with Hardware 3 won't be able to reach full autonomy as initially planned.
Instead, they'll require an upgrade to Hardware 4, signaling a major shift from the company's earlier stance that Hardware 3 would be sufficient for FSD.
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Full Self-Driving Buyers Learn They're Not Quite There Yet
Tesla first claimed during a press call in October 2016 that all its vehicles came with the necessary hardware for full autonomy, encouraging drivers to purchase the FSD package—now priced as high as $15,000.
But during Tesla's Q3 2024 earnings call on Oct. 23, Musk publicly acknowledged that HW3's processing power is no longer sufficient for Tesla's evolving self-driving ambitions. He explained that achieving full autonomy—without driver supervision—requires far more computing power than initially expected.
Tesla is preparing to upgrade eligible vehicles free of charge. While this gesture may prevent legal blowback, it presents a new financial strain at a time when Tesla is already under pressure from slowing sales and tighter competition.
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Electrek estimated that over 4 million cars may be affected, which could cost Tesla hundreds of millions of dollars depending on retrofit demand. While the company did not confirm a figure, Musk referred to the financial impact as "non-trivial."
This isn't the first time Tesla has revised its hardware claims. Mashable reported that in 2019, owners of HW2 and HW2.5 vehicles were told they needed to upgrade to HW3 to continue using new FSD features. Now, five years later, the cycle is repeating with the transition to HW4.
Adding to the pressure, a class-action lawsuit filed in February alleges Tesla misled consumers by overstating its cars’ self-driving capabilities. This latest hardware revelation could strengthen the plaintiffs' claims.
Meanwhile, competitors are charging ahead. According to The Verge, Waymo is completing over 200,000 driverless taxi rides per week using lidar and radar-based systems—components Tesla has consistently avoided in favor of a camera-only approach.
However, Fortune reported that Tesla plans to debut its first supervised robotaxi fleet in Austin by mid-2025, starting with 10 to 20 Model Ys. But Musk cautioned that factors like weather may limit operations, undercutting earlier statements about achieving Level 5 autonomy in all conditions.
Tesla's EV market share in the U.S. dropped below 50% in early 2025, while European sales slumped amid growing competition.
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