The fastest way to understand the car business is to watch what a company stops promising, not what it starts.

In today's issue:

Elon Musk admits millions of older Teslas will never achieve full autonomy, despite a decade of promises to the contrary
Honda reveals a two-brand split: Acura goes hybrid-only, Honda keeps the gas engine alive into the next decade
The 2027 Nissan Z Nismo finally gets its six-speed manual, and five outlets drove it on the same day

BROKEN PROMISES

Tesla Told Buyers Their Cars Would Drive Themselves. Musk Just Said They Won't.

Tesla promised buyers nearly a decade ago that every new vehicle had the hardware required for full autonomy, per Automotive News. CEO Elon Musk confirmed on Tesla's Q1 2026 earnings call that millions of vehicles built with Hardware 3 (HW3) will never achieve fully autonomous operation, citing memory bandwidth as the hard ceiling, per Automotive News and Electrek.
The gap between that sales pitch and this admission is not trivial: FSD was marketed as an optional software unlock, not a hardware replacement program, and customers paid up to $15,000 for it on vehicles that now have a confirmed ceiling on their capabilities, per Automotive News.
Automotive News frames the admission as a looming challenge for the broader industry, noting that Tesla's case highlights what happens when long-cycle hardware commitments meet fast-moving capability requirements.
The official position for years was that all necessary hardware was in place. The data says otherwise: HW3 cars already in driveways will not receive the full product buyers paid for.
Owners of HW3 vehicles face a choice between accepting a lesser product or pursuing a hardware upgrade program whose cost and availability Tesla has not fully detailed.

Tesla's FSD pitch was never just a feature sale. It was a valuation story. Confirming the hardware ceiling on existing vehicles reopens every question about what full-price FSD buyers were actually purchasing, and sets an uncomfortable precedent for any automaker selling autonomous capability on an installment basis.

Also worth knowing

Honda goes two-brand on powertrains: American Honda planning chief Gary Robinson told Automotive News that hybrids will form the "core" of Honda's business and are expected to overtake pure ICE sales. Simultaneously, Just Auto reports Honda previewed two next-generation hybrid prototypes at a Global Business Briefing in Japan and confirmed 15 new hybrid models globally by 2030, aimed primarily at the U.S. market. Acura accelerates to hybrid-only, while Honda keeps combustion engines in the lineup "into the next decade," per Automotive News. The company pushed its fully-electric target to 2050, per the Wheel Bearings podcast. #analyst

Trump's regulatory tweak could force a quadrupling of EV output: A little-noticed Energy Department change to the petroleum equivalency factor (PEF) in CAFE compliance formulas has automakers concerned it could eventually require them to quadruple electric vehicle production, per E&E News. By undervaluing EVs in the compliance calculation, the administration may have inadvertently created a future mandate, the opposite of what it intended. #analyst

VW's 700,000-unit capacity cut is largely done, and Xpeng wants a piece: Volkswagen has now largely completed the domestic production capacity reduction of more than 700,000 vehicles it agreed with IG Metall at the end of 2024, per Electrive.com. Separately, Xpeng confirmed it is in talks with Volkswagen about using a European plant, per the same report. A Chinese EV maker eyeing idle German factory space is the clearest sign yet of how thoroughly the overcapacity crisis has reshuffled leverage. #analyst

Used inventory rebounds but stays historically tight: April used-vehicle supply improved month-over-month, but remains below year-ago levels with rising listing prices signaling demand still outpaces stock, per CBT News. Affordable used vehicles are in especially limited supply, per CBT News, consistent with the FRED data showing used car CPI essentially flat at 179.8 in April, with no relief from the pricing pressure that built through 2025. #market

JLR's reliability tab comes due: For the fiscal year ending March 31, 2026, Jaguar Land Rover reported a £244 million full-year loss, a near-total collapse of the prior year's profit, driven by higher warranty costs and U.S. tariff exposure, per Autoblog and Automotive News. Land Rover's long-standing reliability reputation has now moved from a consumer complaint to a line item. #analyst

Xpeng rolls first mass-produced robotaxi off the line in Guangzhou: Xpeng announced the official rollout of its first mass-produced robotaxi at its Guangzhou facility, per PR Newswire, with Reuters, CnEVPost, and Automotive World all confirming the milestone. Pilot commercial operations are planned for the second half of 2026 to validate technical viability and the business model, per CnEVPost. It is the first time a Chinese automaker has achieved mass production status for a robotaxi. #news

What's new

2027 Nissan Z Nismo finally gets its six-speed manual: Five outlets, including Car and Driver, The Drive, Hagerty Media, MotorTrend, and The Autopian, drove the 420-hp 2027 Z Nismo at Sonoma Raceway on the same day. Car and Driver calls it "a two-seater unlike anything else on the market." Hagerty notes the automatic-only original was "playful and engaging but likely to appeal only to the most diehard Nissan enthusiasts." The manual transmission answers the one complaint that stuck. No pricing announced beyond the prior $66,000 base for the Nismo grade, per Hagerty.

Vision BMW Alpina debuts at Concorso d'Eleganza: The Vision BMW Alpina concept, previewing the first production Alpina model since BMW's acquisition of the brand, premiered at the 2026 Concorso d'Eleganza Villa d'Este as a V8 grand tourer positioned against Bentley Continental GT, per Robb Report and BMW Group. A production model is expected to follow.

Recalls & legal action

Ford recalling 1.4 million F-150s for unexpected downshifts: Ford is recalling approximately 1.4 million F-150 trucks over a defect causing unexpected automatic downshifts, per Jalopnik. The issue is consistent with owner complaints already surfacing on forums, where at least one 2025 PowerBoost owner described hard shifts from 7th to 3rd gear during deceleration at just 3,500 miles.

Quick links

Palou poles Indy 500 as defending champion: Alex Palou set an average speed of 232 mph in the Fast Six to claim his second Indy 500 pole for the 110th running of the race, per Motorsport.com. Rain compressed qualifying into a single day, the first time the defending race winner has started from pole since Helio Castroneves in 2010, per Motorsport.com.

Automakers and suppliers hit a relationship milestone: For the first time in the 26-year history of the Plante Moran Working Relations Index, every major automaker studied, including Toyota, Honda, Nissan, and the Detroit 3, improved their supplier relationship scores in the same year, per Automotive News.

Vehicle data monetization retreats: Vehicle data monetization intent among automakers dropped 7 percentage points year-over-year, per a Sonatus/Omdia survey released May 12 and reported by Automotive News, as regulatory barriers and consumer backlash erode the revenue case.

Senate bill targets Chinese-linked automakers: The Connected Vehicle Security Act of 2026, introduced by Sens. Moreno (R-OH) and Slotkin (D-MI), would bar vehicles from automakers with at least 15% Chinese controlling interest from U.S. roads by 2032, affecting Mercedes-Benz and Volvo alongside Chinese brands, per E&E News and NBC News.

Tesla Told Buyers Their Cars Would Drive Themselves. Musk Just Said They Won't.

BROKEN PROMISES

Tesla Told Buyers Their Cars Would Drive Themselves. Musk Just Said They Won't.

Also worth knowing

What's new

Recalls & legal action

Quick links

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