Massive liability for Tesla; will have to replace computers in 4 million cars or offer compensation.

Tesla is facing major backlash after CEO Elon Musk admitted that the HW3 self-driving computer—installed in about 4 million vehicles since 2016—is not powerful enough to deliver the promised unsupervised self-driving (robotaxi) capabilities. This contradicts Tesla’s long-standing claim that all cars produced since 2016 had “all the hardware necessary” for full autonomy.

While Tesla upgraded earlier HW2.5 vehicles to HW3 for free if they had purchased the Full Self-Driving (FSD) package, Musk now says Tesla will have to retrofit HW3 vehicles—over 500,000 with FSD—for free. This retrofit could cost over $500 million and strain service operations.

Many believe Tesla may have to compensate all HW3 owners due to misleading claims. Legal pressure is mounting, with lawsuits already filed and a precedent set in 2022 requiring Tesla to offer free hardware upgrades for FSD subscription access.

Despite introducing the new HW4 system, doubts remain over whether Tesla can achieve true self-driving capability at all.