Musk Admits Tesla HW3 Can't Support Unsupervised FSD, Plans Mini Factories to Upgrade to HW4

During Tesla's Q1 2024 earnings call, Elon Musk acknowledged that the company’s current Hardware 3 (HW3) is incapable of supporting unsupervised Full Self-Driving (FSD). He noted that Tesla had previously been overly optimistic about HW3’s capabilities, but real-world performance has proven otherwise. For customers who have already purchased FSD, Tesla will offer discounted trade-in options for new vehicles equipped with AI4 hardware (also known as Hardware 4) and will provide hardware upgrade services, including replacement of the onboard computer and camera system. This statement marks a clear departure from Tesla’s previous position that HW3 vehicles could not be upgraded. During the Q4 2023 earnings call, Musk had already hinted at the possibility of upgrading HW3 vehicles, describing the process as “painful and difficult,” and expressing relief that the number of users who had purchased the FSD package remained limited. To accelerate the upgrade process, Tesla plans to establish “mini-factories” in major U.S. metropolitan areas dedicated specifically to converting HW3 vehicles to HW4. Musk explained that relying solely on existing service centers would be too inefficient, and that small-scale production lines are necessary to handle large-scale retrofits. In the long term, fully upgrading all HW3 vehicles to HW4 is essential for integrating them into Tesla’s Robotaxi fleet and enabling unsupervised FSD. Musk also pointed out that HW3’s primary bottleneck is insufficient memory bandwidth. Tesla is developing an upgrade solution—tentatively named “AI4” or “AI4-plus”—that will double the available memory from 32GB to 64GB. This solution depends on Samsung to implement the required hardware modifications and is expected to enter production in 2025. Musk stated that HW4 is expected to truly enable unsupervised autonomous driving.