The upgrade path for Tesla owners who purchased full self-driving software but have older cars is proving to be messy and complicated. 

To take full advantage of the software package that some Tesla owners paid up to $15,000 for, some EV owners will need newer hardware that cannot be easily added. That could mean a trade-in or a computer and camera replacement at new microfactories across the country, according to Elon Musk.

Musk discussed the options during the Tesla Q1 2026 earnings call, telling investors that because of limitations in the hardware for Tesla vehicles labeled HW3 (Hardware 3), those who bought FSD will need a hardware upgrade. The company began transitioning away from HW3 to its next hardware version, AI4 (also known as HW4), in early 2023.

"Unfortunately, HW3 simply does not have the capability to achieve unsupervised FSD," Musk said in the call. "For customers that have bought FSD, what we're offering is essentially a discounted trade-in for cars that have AI4 hardware."

Alternatively, customers will be offered the option to replace the car's computer, but that also requires replacing the car's cameras to get to Hardware 4. That will require Tesla to build "microfactories" across US cities to accommodate the millions of potential upgrades, he said.

Musk also teased that the change might be good for the company's Robotaxi business; it would allow any car retrofitted to HW4 to join the fleet.

As pointed out by the website Inside EVs, Tesla previously described HW3 Tesla cars as capable of full self-driving. The site notes this was detailed in a blog post that has since been deleted. 

A representative for Tesla did not immediately respond to a request for further comment.

Tesla has drawn scrutiny from California's DMV for how it has marketed full self-driving, at one point leading to a showdown that threatened to revoke the company's ability to sell cars in California. Tesla agreed to change its marketing and how it describes full self-driving features, which it had been using interchangeably with the term "Autopilot." 

Tesla has also raised the price of full self-driving and has shifted it to a subscription service rather than a one-time software purchase.