It never stops to amaze how software improvements can greatly expand the capability of a given hardware - all this is done on top of the 2014 autopilot hardware. That is, what I like about software - there seem to be very few hard limits you cannot work around with a clever new approach.
In the race to the self-driving car, Tesla now has one big advantage: they have tens of thousands of cars with the autopilot hardware driving around every day. This gives them a huge lead in the amount of data about their software performance - just comparing what the radar sees and how the human drives in any situation should make a difference.
As much as I love writing clever software to work around hardware limitations (I believe it's what makes videogame programming of the 80's and 90's fascinating and led to better creativity and better games), I once had the job of writing software for "broken" hardware. By this I mean I was in charge of a computer vision algorithm, and the camera was physically incapable of taking the images necessary for the algorithm to function. It's worth mentioning this was for a self-driving car.
Tesla will never come close to a stage 4 autonomous vehicle with the hardware rigs they're currently selling. That said, it'll be interesting to see what improvements they can make with software. Given their over-promise and under-deliver history though (which arguably killed someone), I'll take their marketing with a grain of salt.
If the hardware does not work in the first place, then there is only so much a software can do about it. But here we are talking about a system which works and gets improved.
Tesla is very explicit about the limitations of their current system. So the autopilot accident seems to be mostly about the owner not really understanding what the current autopilot can do and what not - after all, in the car it is just called "autosteer".
There is also already talk about the autopilot 2.0. This consists of augmented hardware, e.g. 3 different front-facing cameras. Only with that hardware Tesla is trying to reach level 3 or 4. The 8.0 update is about enhancing the quality of the existing autopilot but not about reaching new levels of automatic driving.
In the race to the self-driving car, Tesla now has one big advantage: they have tens of thousands of cars with the autopilot hardware driving around every day. This gives them a huge lead in the amount of data about their software performance - just comparing what the radar sees and how the human drives in any situation should make a difference.