Tesla (TSLA) has to replace computer in ~4 million cars or compensate their owners
Tesla (TSLA) has to replace the ‘self-driving’ computer inside about 4 million vehicles or likely compensate the owners of those vehicles.
The liability could be more significant than the largest automotive recall in terms of cost.
In 2016, Tesla claimed that all its vehicles in production going forward have “all the hardware necessary for full self-driving capability.”
Tesla’s use of the term “full self-driving” has changed over the years, but at the time and for years later, CEO Elon Musk claimed that it would mean Tesla owners would eventually receive a software update that would turn their vehicles into “robotaxis” capable of level-4-5 self-driving, which means unsupervised autonomous driving even with no one in the cars.
Almost 10 years later, this has yet to happen and won’t happen soon in most of the cars Tesla has delivered over the last decade.
Tesla’s claim that its vehicles have “all the hardware necessary for full self-driving capability” quickly proved untrue.
At the time, Tesla was producing its vehicles with cameras, a front-facing radar, ultrasonic sensors, and a “self-driving” computer, called HW2.5.”
Tesla quickly started building new vehicles with a new “HW3 self-driving computer” and admitted that its HW2.5 computer was not powerful enough to achieve self-driving capability.
The automaker started retrofitting existing HW2.5 vehicles for free with new HW3 computers owned by drivers who bought Tesla’s ‘Full Self-Driving’ (FSD) software package.
In 2023-2024, Tesla transitioned to another new and more powerful “self-driving computer”, HW4, in its new vehicles.
Unlike when it transitioned from HW2.5 to HW3, this time, Tesla claimed it would still be able to deliver its robotaxi self-driving capability to HW3 vehicles.
Musk even claimed that FSD will get better on HW3 first, as Tesla’s “focus needs to be on getting FSD on HW3 working super well and provided internationally”. He went as far as claiming that FSD performance on “HW4 will lag at least 6 months behind HW3” because of this.
That didn’t last long.
In 2024, we started to report that Tesla was reaching the limits of the HW3 computer, while the capabilities were nowhere near the promised unsupervised robotaxi-level autonomous driving.
It took another 6 months, but in January 2025, Musk finally admitted that HW3 computers are not powerful enough to achieve unsupervised self-driving capability.
There are about 4 million Tesla vehicles in the world with HW3 computers:
| Hardware Version | Production Timeframe | Estimated Vehicles Produced (Global) | Rollout & Overlap |
|---|---|---|---|
| HW3 (FSD Computer) | Apr 2019 – Late 2023 (phased out) | ~4 million (approx.) | Standard in all models from 2019–2022; remained in some cars through 2023. Overlap with HW4 during 2023. |
| HW4 (FSD Computer) | Jan 2023 – Present (ongoing) | ~2.5–3 million (approx.) | Introduced Jan 2023 (S/X first); became standard across all models by early 2024. Overlapped with HW3 in 2023. |
When admitting the computer won’t support the promised self-driving capabilities, Musk said that Tesla would retrofit the computers of all HW3 car owners who purchased the FSD package:
I mean, 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, and that is the honest answer and that’s going to be painful and difficult but we’ll get it done. Now I’m kind of glad that not that many people bought the FSD package.
Musk says that replacing all the computers will be “painful,” and he is “glad” that “not that many people bought the FSD package.”
Tesla never disclosed the official take rate of its Full Self-Driving (FSD) package, but it did disclose having 400,000 FSD beta testers in North America by the end of 2022.
The take-rate is believed to be much lower globally due to the limited value in other markets where Tesla offers fewer ADAS features under the FSD package.
Globally, it’s safe to assume at least another 100,000 HW3 vehicles with the FSD package, which should bring Tesla’s retrofit requirement to over half a million units.
Musk is right to say that replacing the computers in over 500,000 Tesla vehicles will be “painful.” It will strain its service capacity tremendously, on top of the cost, which will easily surpass $500 million.
But that might just be the beginning.
Tesla promised self-driving hardware in all cars
Musk and Tesla not only made promises to those who bought the FSD package, but they promised anyone buying Tesla vehicles since 2016 had “all the hardware necessary for full self-driving capability.”
As we previously reported, Tesla removed the claim from its website last year and changed the language around the FSD package, which was likely aimed at weakening claims for Tesla HW4 owners, but the case for HW3 owners is more straightforward.
In 2019, Musk claimed “Tesla vehicles are now appreciating assets” because of their future self-driving capabilities. Of course, this proved to be completely wrong.
But there’s one thing that’s true about the value of Tesla vehicles: they would be worth more if they had computers capable of supporting self-driving, which Musk just admitted is not the case. That’s regardless of whether they bought the FSD package or not.
Therefore, there’s a strong argument to be made that Tesla needs to replace computers in all HW3 cars or at the very least, compensate the owners for falsely claiming that the vehicles had “all the hardware necessary for self-driving.”
In fact, there’s already legal precedent for this.
In 2022, a judge ordered Tesla to upgrade a customer’s self-driving computer for free so that they can subscribe to Tesla’s Full Self-Driving program without any additional cost. It created a precedent for Tesla owners who don’t purchase the FSD package.
Based on Tesla’s statement that “all cars produced since 2016 have the hardware necessary for full self-driving capability,” the owners of those vehicles need to have all the hardware necessary to have access to these features.
It’s a clear case of false advertising. Tesla says, “Your car has all the hardware necessary for full self-driving,” and when an owner wants to try the features, Tesla tells them, “You have to pay $1,000 for us to upgrade your hardware.” Something doesn’t add up.
Electrek’s Take
I would be surprised if Tesla does as Musk claimed and replaces HW3 computers in any car, let alone over half a million cars, or as it should be, about 4 million vehicles.
It’s too complicated and costly. It would add hundreds of thousands of work hours to Tesla’s already ultra-busy service operations, and it may not even work.
After being wrong about HW2.5 and HW3, the level of confidence in Tesla achieving unsupervised self-driving on HW4 vehicles is not really high, despite HW4 vehicles not only having more powerful computers but also better cameras.
I don’t think it’s realistic to believe that Tesla will enable level 4 or 5 self-driving capabilities in what are, in some cases, almost 10-year-old vehicles through a computer retrofit.
My 2018 Model 3 Performance was originally a HW 2.5 vehicle, and I purchased the FSD package. Tesla upgraded my computer to HW3 in 2019. We are now in 2025, and Musk finally admitted that the computer I bought 6 years ago won’t enable the self-driving capacity I was promised.
My car will never be self-driving, and I don’t believe Tesla will ever offer a free computer upgrade.
I think Tesla will have to compensate every Tesla HW3 owner worldwide. That would mean about 4 million vehicles and a liability of several billion dollars.
At first, instead of the computer retrofit, I think Tesla will use this as an opportunity to encourage people to upgrade, like it did with the “FSD transfer windows.” Maybe it will offer buybacks at a higher rate to compensate owners.
As for those who didn’t buy the FSD package, I don’t think Tesla will offer anything based on Musk’s messaging. It will have to go through the courts.
There are already several lawsuits filed against Tesla over its self-driving claims, and that was before Musk’s admission that HW3 won’t support unsupervised self-driving. I believe that those lawsuits will ramp up this year.
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EV and battery supply chain research specialists Benchmark Mineral Intelligence reports that 2.0 million electric vehicles were sold globally in November 2025, bringing global EV sales to 18.5 million units year-to-date. That’s a 21% increase compared to the same period in 2024.
Europe was the clear growth leader in November, while North America continued to lag following the expiration of US EV tax credits. China, meanwhile, remains the world’s largest EV market by a wide margin.
Europe leads global growth
Europe’s EV market jumped 36% year-over-year in November 2025, with BEV sales up 35% and plug-in hybrid (PHEV) sales rising 39%. That brings Europe’s total EV sales to 3.8 million units for the year so far, up 33% compared to January–November 2024.
France finally returned to year-to-date growth in November, edging up 1% after spending most of 2025 in the red following earlier subsidy cuts. The rebound was led by OEMs such as the Volkswagen Group and Renault, a wider selection of EV models, and France’s “leasing social” program, aimed at helping lower-income households switch to EVs.
Italy also posted a standout month, logging record EV sales of just under 25,000 units in November. The surge followed the launch of a new incentive program designed to replace older ICE vehicles. The program earmarks €597.3 million (about $700 million) in funding for the replacement of around 39,000 gas cars.
The UK expanded access to its full £3,750 ($4,400) EV subsidy by adding five more eligible models: the Nissan Leaf (built in Sunderland, with deliveries starting in early 2026), the MINI Countryman, Renault 4, Renault 5, and Alpine A290.
US market slows after federal tax credit’s premature death
In North America, EV sales in the US did tick up month-over-month in November, following a sharp October drop after federal tax credits expired on September 30, 2025. Brands including Kia (up 30%), Hyundai (up 20%), Honda (up 11%), and Subaru (232 Solterra sales versus just 13 the month before) all saw gains, but overall volumes remain below levels when the federal tax credit was still available.
Policy changes aren’t helping. In early December, Trump formally “reset” US Corporate Average Fuel Economy (CAFE) standards, lowering the required fleetwide average to about 34.5 mpg by 2031. That’s a steep drop from the roughly 50.4 mpg target under the previous rule. Automakers can now meet the standard largely through gas vehicles, reducing pressure to scale BEVs and PHEVs.
Those loosened rules are already reflected in investment decisions, such as Stellantis’ $13 billion plan to expand US production by 50%, with a heavy focus on ICE vehicles. Earlier this year, Trump’s big bill set fines for missing CAFE targets to $0, further weakening the incentive for OEMs to electrify.
That’s some foolish policymaking, considering the world reached peak gas car sales in 2017. The US under Trump will be left behind, just as it will be with its attempts to revive the coal industry.
China still dominates, exports surge
China remains the backbone of global EV sales, even as growth slows. The Chinese market grew 3% year-over-year and 4% month-over-month in November. Year-to-date, EV sales in China are up 19%, with 11.6 million units sold.
One of the biggest headlines out of China is exports. BYD reported a record 131,935 EV exports in November, blowing past its previous high of around 90,000 units set in June. BYD sales in Europe have jumped more than fourfold this year to around 200,000 vehicles, doubled in Southeast Asia, and climbed by more than 50% in South America.
Global snapshot
Global EV sales from January to November 2025 vs January to November 2024, YTD %:
- Global: 18.5 million, +21%
- China: 11.6 million, +19%
- Europe: 3.8 million, +33%
- North America: 1.7 million, -1%
- Rest of World: 1.5 million, +48%
The takeaway: EV demand continues to grow worldwide, but policy support – or the lack thereof – is increasingly shaping where this growth shows up.
“Overall, EV demand remains resilient, supported by expanding model ranges and sustained policy incentives worldwide,” said Rho Motion data manager Charles Lester.
Read more: EV sales *still* have not fallen, cooled, slowed or slumped. Media is lying to you.
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The Elexio is Hyundai’s first electric SUV custom-tailored for the Chinese market, but now it’s headed overseas.
Hyundai is bringing the Elexio electric SUV overseas
Hyundai’s midsize electric SUV was spotted on a carrier truck in Melbourne, Australia, alongside a few of its other vehicles.
Although the Elexio is built by Hyundai’s joint venture with BAIC Motor, Beijing-Hyundai, “tailor-made for Chinese consumers,” we had a feeling it would be sold overseas.
A few months ago, Don Romano, CEO of Hyundai Australia, hinted that the midsize electric SUV could arrive in The Land Down Under. Romano told journalists during an IONIQ 9 launch event that the Elexio’s launch in Australia was “under evaluation,” calling it “a promising vehicle.”
Hyundai confirmed the rumors shortly after, saying the new midsize electric SUV would launch in Australia in early 2026.
According to CarsGuide, the Elexio was caught on a car carrier in Melbourne on Wednesday morning ahead of its official launch.
Powered by an 88.1 kWh battery, the Elexio delivers up to nearly 450 miles (722 km) CLTC range. It’s based on the E-GMP platform, which underpins all IONIQ models and Kia’s EV lineup, with single and dual-motor (AWD) powertrain options. The electric SUV can also recharge from 30% to 80% in about 27 minutes.
The interior is packed with advanced Chinese tech, including Huawei’s advanced driver-assistance systems (ADAS) and a Qualcomm Snapdragon 8295 chip that powers the massive 27″ 4K widescreen display.
The Elexio is 4,615 mm long, 1,875 mm wide, and 1,698 mm tall, with a wheelbase of 2,750 mm, which is a bit shorter than the Tesla Model Y. It’s closer in size to the BYD Yuan Plus, sold overseas as the Atto 3.
Hyundai’s midsize electric SUV is expected to compete with some of Australia’s top-selling EVs, including the Tesla Model Y and Geely EX5.
Prices have yet to be announced, but given the IONIQ 5 starts at $76,200 (AUD), before on-road costs, the Elexio should be slightly cheaper.
In China, the Elexio is available in three trims: Fun, Smart, or Tech, with pre-sale prices starting at RMB 119,800 ($16,900).
Although the electric SUV is launching in Australia and possibly other overseas markets like New Zealand, it’s not expected to be a true global vehicle. Hyundai designed it specifically for Chinese buyers, leveraging local tech and design elements.
For those in the US, if you’re looking for a midsize electric SUV, the IONIQ 5 is worth a look with 300+ miles of range, fast charging, and a spacious, tech-filled interior. With leases starting at just $189 a month, the IONIQ 5 is cheaper than most gas-powered cars in its class. You can use our link to find the Hyundai IONIQ 5 models closest to you.
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Iron-sodium battery makers Inlyte Energy just crossed an important line from lab to grid reality. The company has completed a factory acceptance test of its first field-ready iron-sodium battery energy storage system with reps from a major US utility in attendance.
Iron-sodium battery storage
The test took place at Inlyte’s facility near Derby in the UK, and was witnessed by representatives from Southern Company, one of the largest electric utilities in the US. The goal was to prove the performance and integration readiness of the whole system, which combines sodium metal chloride battery cells with inverters and control electronics. By Inlyte’s account, the system performed as expected and is ready for field deployment.
The energy storage market is growing fast, and utilities are looking beyond lithium‑ion. Iron-sodium battery storage systems are emerging as a compelling alternative to lithium-ion batteries for grid-scale use, as they rely on abundant, low-cost materials and offer strong safety and long-duration performance.
While lithium-ion batteries excel at fast response and short-to-medium-duration storage, iron-sodium systems are better suited for multi-hour to multi-day grid applications where cost, thermal stability, and long service life matter more than energy density.
The global energy storage market is projected to grow from approximately $70 billion in 2025 to over $150 billion by 2030. The US Department of Energy estimates the grid will need more than 225 gigawatts of long‑duration energy storage by 2050.
Inlyte is betting that iron‑sodium batteries can help fill that gap. The system tested in the UK utilizes what the company claims are the world’s largest sodium metal chloride battery cells and modules ever built, each capable of storing more than 300 kilowatt-hours of energy. The chemistry is designed to be lower-cost, safer, and longer-lasting than lithium-ion – key traits for grid-scale storage.
During the factory test, Inlyte’s battery system hit 83% round‑trip efficiency, including auxiliary loads. That puts it in the same range as high-performance lithium-ion systems and well above the roughly 40% to 70% efficiency typical of many other long-duration energy storage technologies. Southern Company’s R&D team observed the test in person, a step that helps clear the way for real‑world deployment.
The commercial plan
Next up: the field. Inlyte says its first energy storage systems will be installed at Southern Company’s Energy Storage Test Site in Wilsonville, Alabama, in early 2026. Those deployments will allow the utility to study how the iron‑sodium batteries perform under real grid conditions.
With technical readiness now demonstrated, Inlyte is turning its focus to US manufacturing. The company plans to finalize a site for its first domestic factory in 2026. To help speed that process, Inlyte has partnered with HORIEN Salt Battery Solutions, the world’s largest producer of sodium metal chloride batteries. HORIEN brings over 25 years of commercial experience across applications like critical power, remote industrial sites, and battery energy storage.
The plan is to combine HORIEN’s manufacturing know‑how with Inlyte’s system integration work to bring sodium‑based grid batteries to the US market. If all goes according to plan, Inlyte expects commercial deliveries of domestically produced systems to begin in 2027.
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