(Austin, Texas) Every quarter I go through Tesla’s earnings calls for What’s Up Tesla, and there is a segment from yesterday’s April 22, 2026 Q1 call that stood out to me.

Elon Musk gave the clearest picture yet on what’s happening with older Hardware 3 (HW3) Model 3s, Model Ys, and other cars. He confirmed HW3 can’t reach unsupervised Full Self-Driving and laid out the upgrade path: new computer and new cameras.

But the part that fascinated me was when he talked about setting up microfactories in major cities because regular service centers simply can’t handle the volume. So take a little breather in your busy day. Let’s hang out for a few and walk through exactly what Elon said, plus my thoughts on what this could mean for timelines, jobs, costs, and the Robotaxi future, including a couple of ideas that popped into my head.

Elon Musk on the HW3 Upgrade Plan (Verbatim)

The question came up about how HW3 cars will ever get to unsupervised FSD. Elon was straightforward:

“Unfortunately, Hardware 3 — I wish it were otherwise, but Hardware 3 simply does not have the capability to achieve unsupervised FSD. We did think at one point it would have that, but relative to Hardware 4, it has only 1/8 of the memory bandwidth of Hardware 4, and memory bandwidth is one of the key elements needed for unsupervised FSD.”

Then came the practical plan for owners who bought FSD:

*“For customers that have bought FSD, what we’re offering is essentially a discounted trade-in for cars that have AI4 hardware, and we’ll also be offering the ability to upgrade the car to replace the computer — you also need to replace the cameras, unfortunately, to go to Hardware 4.

To do this efficiently, we’re going to have to set up microfactories or small factories in major metropolitan areas in order to do it efficiently. Because if it’s done just at the service center, it is extremely slow and inefficient. So we basically need like many production lines to make the change.

And I do think over time it’s going to make sense for us to convert all Hardware 3 cars to Hardware 4 because that’s what enables them to enter the Robotaxi fleet and have unsupervised FSD.”*

(Short note from the call: Ashok also mentioned a V14-lite build is still coming to HW3 cars in late June so supervised FSD keeps improving in the meantime.)

My Thoughts: Imagining the Microfactory Timeline

The microfactories and hardware upgrade (new computer and cameras) are being offered first to customers who bought FSD. However, Elon made it clear he sees this expanding over time:

“And I do think over time it’s going to make sense for us to convert all Hardware 3 cars to Hardware 4 because that’s what enables them to enter the Robotaxi fleet…”

So the program starts with FSD owners but is ultimately aimed at getting the entire old fleet Robotaxi-ready.

This feels like classic Tesla. Honest about the technical limits, then practical about fixing it at scale. The microfactories idea is huge. Here’s how I see it playing out (pure speculation based on how Tesla has rolled out other big projects):

Jobs boost for local economies

These won’t be giant Giga factories. They’ll be smaller microfactories or dedicated conversion lines in major metro areas. That means real local jobs, technicians, logistics teams, quality control, even small supply-chain roles, right in cities where Tesla owners live. It could be a nice economic win for places like Austin, LA, New York, Chicago, etc.

Pop-up tent style?

Elon has done quick-setup production lines before. Remember the famous pop-up tents he threw up in the Fremont parking lot during the early Model 3 ramp? Those temporary structures let Tesla crank out cars fast without waiting for permanent buildings. I could totally see the microfactories starting the same way: big white tents or modular setups that pop up quickly in parking lots or industrial zones near big cities. Fast, cheap, and scalable. Exactly Tesla’s style.

When will it actually happen?

My best guess: these microfactories start showing up once unsupervised FSD (or at least V15 on AI5) is fully proven and legal in more states, probably late 2026 or early 2027. Why? Because the whole point Elon mentioned is getting these cars into the Robotaxi fleet. No reason to rush the hardware swap until the software is truly ready and owners can start earning money (or Tesla can buy the upgraded cars back for the fleet).

Microfactories as Robotaxi certification stations

Here’s a vision I can’t stop thinking about: these microfactories could double as inspection and certification hubs for Tesla Robotaxi network.

Roll a HW3 car in for the hardware upgrade, and while they’re swapping the computer and cameras, the team also does a full interior and exterior check. Torn seats? Vape smell? Beer spills? The car wouldn’t pass for Robotaxi duty until it’s cleaned up and certified robot-ready. It would be the perfect one-stop shop: upgrade the brains and make sure the whole car meets initial fleet standards. Tesla could even offer a Robotaxi prep package that includes detailing and minor fixes so your upgraded car is immediately eligible to join the network (or be bought back by Tesla).

What about cost?

Elon could not possibly give specific numbers on the call. My rough guess based on past Tesla retrofits and how they’ve handled FSD commitments:

• For owners who bought FSD, the retrofit (new computer and cameras) could end up being free or heavily discounted as part of honoring the original purchase.
• For owners who didn’t buy FSD, it would likely be a paid upgrade.

Either way, even if it lands in the $2,000–$4,000 range, it’s still far cheaper than buying a new vehicle. And best of all, your existing Tesla stays yours with full unsupervised capability and the potential to earn money in the Robotaxi fleet.

Tesla desires to convert all HW3 cars over time.

The microfactories plan (possibly with pop-up tent speed and built-in certification) shows is fleshing out a plan for turning millions of existing vehicles into Robotaxis.

For the full call replay and transcript, head to Tesla IR ir.tesla.com or the Say Technologies Q&A page. The exact HW3 section is pure gold.

Thanks for reading, and keep believing in the mission!