Elon Musk said Wednesday that millions of Tesla owners will need hardware upgrades to run a future version of its Full Self-Driving software that doesn’t require human supervision — after he and Tesla spent years promising that wouldn’t be the case.

The admission could open the company up to legal challenges from customers who bought Teslas on the belief that the cars were just one software update away from being able to drive themselves.

Musk said on Tesla’s quarterly earnings call Wednesday that cars with the third version of Tesla’s driver-assistance tech, known as “Hardware 3,” will need a new computer and new cameras. He also said these replacements will be so burdensome that Tesla is looking at building “micro-factories” in “major metropolitan areas” so the company’s service centers don’t get overwhelmed.

“If it’s done just at the service center, it is extremely slow to do so, and inefficient. So we basically need, like many production lines, to make the change,” Musk said on the call.

Tesla owners with Hardware 3 cars have spent years bugging the company and Musk for a straight answer about whether they would be able to run this advanced version of Full Self-Driving — which, it should be noted, Tesla has not yet released, or proven it can. Tesla sold these cars between 2019 and 2023.

Musk finally copped to the reality that Hardware 3 was insufficient to run more advanced versions of Full Self-Driving in January 2025.

“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,” he said. “That’s going to be painful and difficult, but we’ll get it done.”

However, the company’s chief financial officer, Vaibhav Taneja, made a different claim just six months ago in October 2025 when he said Tesla may still be able to make it work. “We have not completely given up on HW3,” he said at the time.

Tesla said Wednesday it will still release slightly more advanced versions of the current Full Self-Driving software to Hardware 3 owners. But Musk was unequivocal that upgrades will be needed for anything more.

“Hardware 3 simply does not have the capability to achieve unsupervised FSD,” he said.