I'd have no issue with the lienholder having ultimate control of car until the loan is paid off. As I said in my initial comment, that's completely beside the point.

The problem here is that Model 3s are apparently "loyal" to their manufacturer rather than the owner, regardless of who that owner is (whether that be a lienholder, the car's "user", or anyone else that's not Tesla).

That Tesla used that misplaced loyalty to give the car back to the lienholder in this case is irrelevant to my point.

Are you okay with manufacturers helping with repossessions by cutting new physical keys for non-connected cars? If so, how is this any different?

See my comment 4 levels up from this one.

"I know what this person's key was when I sold him the car. Here, have a copy."

VS.

"I have full control of this person's car, even though I'm not the owner. Here, let me remotely disable it for you."