Tesla weighs micro-factories to retrofit Hardware 3 cars for FSD as Musk concedes limits of older systems

Tesla is considering building so-called micro-factories in major US metro areas to speed up retrofits for older vehicles that owners bought with the Full Self-Driving option.

CEO Elon Musk said the approach would be more efficient than relying solely on service centers.

The comments come after Musk acknowledged during Tesla’s first-quarter earnings call that the company’s Hardware 3 platform cannot deliver unsupervised FSD. Many Teslas built in the 2019 to 2023 window used Hardware 3, which Tesla previously positioned as capable enough for future autonomy upgrades.

Why Hardware 3 hits a ceiling?

Musk said the upgrade path to Tesla’s newer Hardware 4 stack would require replacing the Autopilot computer and, in many cases, the cameras as well. That hardware swap, he argued, is difficult to scale with typical service-bay workflows.

He added that setting up small production-line style facilities could streamline the work, turning retrofits into a repeatable process rather than one-off service jobs. Tesla has not provided a timetable or locations for such sites.

Who gets the retrofit offer?

Tesla’s current plan is focused on customers who purchased FSD outright, rather than drivers who rely on subscriptions. Musk said Tesla is offering either a discounted trade-in into an AI4-equipped vehicle or the option to upgrade the existing car.

The distinction is likely to draw scrutiny because Tesla has, for years, emphasized software-driven progress delivered via over-the-air updates. The new stance underscores that the road to unsupervised driving depends on hardware capacity as well as software capability.

Robotaxi ambitions raise the stakes

Musk suggested that retrofitting more vehicles could ultimately help expand a future Robotaxi fleet, since Tesla’s newer hardware is presented as the foundation for unsupervised operation. He also said Tesla expects to achieve unsupervised self-driving with Hardware 4.

He noted Tesla is preparing a further hardware revision described as AI4 or AI4-plus, including a move from 32 GB to 64 GB of RAM, with production expected next year once supplier changes are completed.

For owners of older cars, the key question remains how widely Tesla will extend upgrades beyond those who paid for FSD upfront.