Tesla’s Full-Self Driving (FSD) technology continues to evolve, and with the release of FSD v12.5, the differences between AI3 (Hardware 3) and AI4 (Hardware 4) are becoming more pronounced. In this test, we drove three Tesla vehicles—a Model Y with AI3, a Model Y with AI4, and a Model X with AI4—all running the latest FSD version. To add an extra layer of comparison, we also let a human driver take the wheel. The results? FSD on AI4 is not only superior to AI3 but even more reliable than a human driver.
The Setup
As Brad explained at the start: “We’re going to try three different cars on 12.5 and see if we experience any kind of differences, how smooth it feels to us.” The goal was simple—put FSD through its paces on identical routes, comparing the performance of AI3 and AI4 hardware.
Tesla Hardware AI3 vs AI4: First Impressions
The first drive in Matt’s AI3 Model Y revealed some initial concerns about the smoothness of turns and decision-making. As Brad pointed out during a roundabout, “It did have a hesitation that was a bit unusual.” Spencer agreed: “The turning on this car so far in the first roundabout was pretty jerky.”
This jerky experience was contrasted with the smoother feel of AI4. Brad, reflecting on his experience with the Model X AI4 hardware, noted, “It feathers the acceleration and deceleration better than I can.” Matt chimed in, “It just felt like a chauffeur where every acceleration and deceleration was extremely gradual.”
FSD Performance Differences
While both hardware versions were running FSD v12.5, the AI4 clearly outperformed AI3 in several aspects, including smoother braking and more precise turns. Jordan, reflecting on the Model Y AI3, said: “I was watching the steering wheel and it looked pretty jerky.” The AI4 Model Y, however, going through the same roundabouts in Carmel exhibited a much smoother turn, a noticeable difference just by watching the steering wheel.
Human Driver vs. FSD
As a final comparison, Brad took the wheel in the Model X to see how a human driver fared against the AI. The verdict? Even seasoned drivers couldn’t match the smoothness and precision of the FSD system. Brad confessed, “The regenerative braking with the X might hit me differently. I definitely can’t do it that smooth with the Y.”
Matt added a critical observation: “If we were just having a normal conversation, I wouldn’t be thinking about your driving. But after the FSD experience, I’m like, ‘You’re 10% more aggressive with braking than the Model X.’” This was a powerful testament to how refined FSD has become.
The Impact on Tesla’s Financials
Tesla’s FSD technology isn’t just about making driving more convenient—it’s about fundamentally changing the economics of the automotive industry. The smoother, more precise performance of AI4, combined with the ever-improving FSD software, positions Tesla as the leader in autonomous driving technology. As more drivers experience the clear advantages of FSD on AI4, demand for AI4-equipped vehicles is likely to surge.
Brad’s insight about AI4’s capabilities sums it up well: “It’s just delightful to ride in, and frankly, I can’t drive smoother than the system.” This user experience is crucial because as more Tesla owners upgrade to FSD and AI4, Tesla's potential revenue streams from software subscriptions will increase exponentially.
The market has already shown a willingness to pay a premium for Tesla’s FSD capabilities. As AI4 hardware becomes the new standard and FSD technology continues to improve, Tesla is poised to capture even more value. Spencer noted, “I’ve never seen a safety-critical intervention with my AI4 Model Y,” highlighting the reliability that will further solidify consumer trust and drive adoption rates.
In financial terms, this means that Tesla’s gross margins could significantly benefit from the continued roll-out of AI4. With FSD available as a recurring subscription service or one-time purchase, each software upgrade brings in additional high-margin revenue. As Tesla expands its fleet of AI4-equipped vehicles, the company could transition from a primarily hardware-focused revenue model to a software-centric one, where FSD subscriptions provide steady and growing cash flow.
The Verdict
The comparison between AI3 vs AI4 Tesla hardware shows that AI4, paired with FSD v12.5, offers a much smoother, more confident driving experience. As Brad summarized, “It seems like every roundabout, there’s a slight hesitation or adjustment it’s making [in AI3], whereas with AI4, it’s a smooth turn 90% of the time.”
For those who demand the best self-driving experience Tesla has to offer, upgrading to AI4 is clearly the way forward—not just for the driving experience, but also for Tesla’s financial future. As the company scales up AI4 production and expands FSD capabilities, the potential for recurring revenue streams will play a crucial role in boosting Tesla’s long-term profitability.
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