On March 10, the Chinese Ministry of Industry and Information Technology spoke with Tesla regarding its HW2.5 hardware downgrade scandal. Earlier this month, an owner of Tesla’s upgraded Model 3 posted on Weibo that the hardware code of their car controller was inconsistent with the number on the vehicle’s documents. Following the accusation, Tesla admitted that HW2.5 autopilot chips were installed in a large number of made-in-China Model 3s despite the fact that environmental documents of the vehicles clearly say HW3.0.
The Ministry urged Tesla to implement rectification measures immediately, requesting the company to “fulfill the main responsibility of the enterprise, ensure production consistency and product quality”. Tesla’s hardware downgrade is deemed to have violated related regulations, based on Provisions on the Access Administration of New Energy Vehicle Manufacturers and Products, an order passed in 2016.
HW3.0 is Tesla’s latest generation of autonomous driving motherboard suite equipped with a self-developed Full Self Driving (FSD) autopilot chip, and is capable of processing 2300fps images, 21 times more powerful than the HW2.5 version. Tesla released a statement amidst the widespread discontent, claiming that the downgrade in hardware was due to “supply chain problems”.
“HW2.5 and HW3.0 are virtually the same for owners who did not purchase additional FSD services”, Tesla claimed. “We have installed the latest HW3.0 for all users that have purchased FSD”. Tesla also promises to provide free retrofitting services for all Made-In-China upgraded Model 3 owners to upgrade their HW2.5 chip to HW3.0 “as production capacity and supply chains recover”.
However, Tesla’s explanation failed to appease users on Chinese social media. Multiple online comments suggested that Tesla is “spoiled” by Chinese customers and the government. One comment read: “Tesla is halfhearted in its statement. They should offer an apology.”
Tesla vehicles have long been a favorite among Chinese EV consumers, with the company earning revenue of $2.979 billion in 2019, up 69.55% from $1.757 billion in 2018. The Model 3 is particularly popular among Chinese customers as it was the first Tesla model to be produced in Tesla’s Shanghai gigafactory and received a major price reduction. In January 2020, the number of new Teslas licensed in China was 3,563, of which 2,605 were Made-In-China Model 3s, accounting for 73% of the total.