@dleidy: I investigated this further, and it turns out that FAT32 is not limited to 32GB (that's a Windows specific limitation). As I mentioned in my previous post, I did not reformat my 64GB USB drive before using it in my 2016 Model S; according to the SanDisk web site, their 128GB and smaller compact flash drives are formatted using FAT32. So it's still possible that NTFS drives don't work despite what the owner's manual says, but you can use FAT32 for drives larger than 32GB if you have the right formatting tools.
For those wondering why Windows has a 32 GB limitation, it's just a choice on the designer of the format program, not the file system. The FAT32 standard supports up to 8 TB drive sizes. As you get to these larger sizes, the FAT32 structure wastes some space, especially for small file sizes.
With music files, often 10 MB or larger, this wasted space is minimal, and not of any concern. Most (but not all) USB drives larger than 32 GB are pre-formatted as NTFS or exFAT32. These alternative formats are ones Tesla (and many other devices) do not understand. You can easily reformat these drives to FAT32 using various tools described in this thread or with step-by-step instructions at.
I listen to USB stick music a lot. My stick is 32 Gig and formatted FAT 32. My wife writes her favorites to the same stick on her Windows 7 machine in WMA format and I write mine on my iMAC using iTunes and AIFF encoding. Both play just fine in the car. Her files show up in albums but mine do not and therefore have to be put into folders at the time of writing to the stick. This is the only drawback I see so far and given the blinding speed of my iMac when burning CD's to iTunes it is not an expensive one. I own a Model S (mid-2016 production) Running 8.0 software.
It’s easy to format USB flash drive to FAT32 via Windows built-in tools like Disk Management. But if the USB drive is beyond 32GB or becomes RAW, you can apply a free FAT32 format tool. Cloud Files Transfer & Sync. That is to say, you can’t format 64GB, 128GB or larger USB with FAT32 file system via Disk Management.
Mine is a Sandisk which is hardly an off brand and it came formatted with FAT32. It's in their best interest to format in a way that will be compatible with as many devices as possible so they get fewer returns, and it's easy to reformat to something else if you don't want FAT32 so I don't see why a manufacturer wouldn't format it that way. Doing anything else would be as stupid as Windows not having the option when the whole point of a removable device is that it will be connected to something else and is most likely not going to be exclusive to to the Window PC. Is Microsoft stupid? Don't answer that.
Jut buy a device that will work in the first place. A couple of others said exFAT worked, so I accepted it.
I just took a working 128 GB flash drive in FAT32, and reformatted it as exFAT, added a few songs and - surprise - nothing. Doesn't detect it at all. So no exFAT support. Perhaps it worked for some early versions of 8.0, but not working on 2.50.180, a fairly current release and a new car as well (Dec-2016).
This is not a big deal, as FAT32 works fine, but I've found most drives above 32 GB come pre-formatted for exFAT. It is a bit more efficient with small file sizes. It provides very little benefit over FAT32 for music - as all the files are rather large.