[Tesla Files #1] FSD Chips Removed; Model X Powertrain Flaw Covered Up

Reviewing the 3.8% of the 100 GB Tesla Files that were released on 31 December 2023

Background of The Tesla Files

“The Tesla Files” was one of 2023’s most epic articles about fraud at Tesla that was overlooked mainly by the US government, but also by the EU (ironically, China went after Tesla harder than Western countries). It came from Lukasz Krupski, a whistleblower who had worked at a Norwegian Tesla service center until March 2022.

He downloaded and leaked a 100 GB file of internal Tesla documents, communications, and more to Handelsblatt, which spent nearly a year confirming it. Their brilliant scoop was released in May 2023 and this was my review of their findings at the time (here).

Lukasz recently revealed his identity by making himself available for interviews to major press organizations. He did so in order to lend more credence to the Tesla Files he released because no government had taken any serious action against Tesla since Handelsblatt published their findings in May 2023.

The Tesla Files made their rounds to other media organizations, each of which had to confirm anything they published, which is what took them so long since the May 2023 Handelsblatt article was published and why it’s all coming out now.

The 3.8% of The Tesla Files that came out on Twitter yesterday has a harrowing amount of complex data in it which, in order to understand, not only requires auto engineering expertise but also legal knowledge of how carmakers get sued for screwing customers or breaking safety laws.

I spent much of my New Year’s Eve trying to go through the files to find any incriminating evidence that I could as an auto stock analyst. So far, I’ve only found evidence of how Tesla could be royally sued due to their systematic policy of screwing anyone who’s already paid for their cars.

Below is what I have so far. I’ll publish the rest as I make my way through the 3.8 GB file I have. I’d publish screenshots of the actual files, but I first need to confirm with my compliance officer whether I’d face legal liabilities.

FSD Chips Removed During Chip Shortage of 2022

As of November 2021, Tesla took out a chip in the steering column that provided redundancy in the event of failure either in the gear itself, the software or wiring. Not having a chip like this means that driving with FSD engaged could lead to deadly accidents if the wiring system malfunctions.

This coincides with the peak wave of the automotive chip shortage in 2022, and to me, explains why Tesla was skimping on redundant chips (for FSD to work, Tesla needs many redundant chips for safety reasons).

According to the internal memo, malfunctions as such are “common” in Tesla’s cars due to the “poor quality of the [wire] harnesses”. Such problems could also occur if there was water ingress, intermittent connections, or CPU hang.

As of late January 2022, there had already been 43,000 cars shipped from Fremont alone (China data was inaccessible, but I’m confident things were the same there) without this “backup” chip, which is said to be indispensable in the “legal requirements for Level 3 and 4 autonomy”. Tesla began removing the extra chip from its steering rack in November 2021 and the last time one could confirm whether Tesla was still doing this was in March 2023. Given a 7.1% FSD take rate during that period, at least 145,080 vehicles were sold without the extra chip needed to eventually have Level 3 or 4 autonomy.

To fix this would cost Tesla around $2,380 as the entire steering rack would have to be replaced (the chips are glued into the rack). This would amount to around $345 million* in recall costs. If Tesla actually achieved Level 3 or 4 autonomy and all models sold during this “chip-removal” period needed a fix, the recall bill would be $1.3 billion. The class-action lawsuits in the US alone could eclipse that amount.

The biggest claim Lukasz makes is that Elon Musk knows FSD will never be completed, yet continues to pump Tesla on the FSD theme (e.g. repeatedly saying that Tesla is an “AI/Robotics” company due to FSD and its humanoid robot, Optimus—both of which have yet to show functionality).

From what I can see, Lucasz bases this on the removal of the critically important redundancy chip in the steering column from November 2021. The chip shortage began to ease up from late 2022, so it would be great if the regulators investigated whether Tesla is still skimping on this important chip.

Model X Drivetrain Design Flaw--Vibrating Half-Shafts

The Tesla Model X has a flawed front powertrain design. It reveals itself initially with vibrating front half-shafts. Instead of changing the flawed design (excessive half-shaft angles) which would entail huge costs, Tesla informs customers that this is merely a “noise, vibration, harshness (NVH)” issue while disregarding their concerns.

If the customer insists, Tesla service center employees are told to charge them $350 for a fix (official internal communication). Out of warranty, this is a roughly $2,000 repair. Often, complaints about this flaw come in as soon as a few weeks or months of the car's operation.

Tesla took steps to hide the issue and started reducing the torque on the front-drive unit motor (likely via over-the-air updates) both for regenerative braking and acceleration. I haven’t done it yet, but this could likely be confirmed on NHTSA’s website.

On top of that, technicians lower the Model X’s suspension (with calibration procedure) below the specifications communicated in the Service Manual to decrease half-shaft angles. All this was done to save money at the risk of the customer’s safety.

Working at full speed to go through the files I received and will release any significant findings in short reports. It definitely gets worse, the more I read. And I only have 3.8% of the whistleblower’s internal data from Tesla.

* Erratum: In the original version of this report, the estimated cost to install a redundancy chip needed for FSD Level 3 or Level 4 was estimated at $3.25 billion. This was corrected to $345 million on the assumptions mentioned above.

NOTE: Nothing above is investment advice.