This week, the Tesla community blew up over another impending price rise for Tesla’s FSD software. On the back of the latest FSD Beta build (v10.69) being released, Elon announced on Twitter that the price to buy FSD outright in North America, would increase from US$12,000 to US$15,000 on September 5th.
Many Tesla forums and chatrooms lit up with opposition to yet another price rise for software that is still in development. When people become outraged at these price rises, they typically are considering their own ability to pay for these features, but I think what’s happening here is of a much larger context.
Tesla is expected to be making around 10 Million cars per year by 2030. To date, there’s around 100,000 people in the FSD Beta program, but there are likely many more that have purchased FSD. Even if that figure is 10x, 1 million consumer vehicles, compared to millions of robotaxis produced every single year, will see a very different structure to how we think of Tesla today.
If Tesla achieves their ambition to iterate their software to the point where these cars can drive themselves, and ultimately become part of a robotaxi network, Tesla as a business will then see those owners who purchased FSD, as competition.
Right now, let’s imagine the average Tesla sells for around US$50,000, but Tesla extracts around 30% gross profit by selling to consumers for profit. In the future, where they make and don’t sell dedicated robotaxis, their wholesale cost to produce that similar vehicle could be as low as $30,000 or even less.
This means a Tesla-made robotaxi would need to make just $30,000 in revenue, then everything else is profit, for the life of the vehicle.
As uncomfortable as this is to think about for owners who’ve effectively funded the development of FSD, I think we are rapidly approaching the point where Tesla is intentionally pricing regular owners out of the market. As an interim measure, Tesla is likely to continue to offer FSD as a subscription to the more than 1.5 Million+ vehicles with HW3 and above.
If you’re the average family and look at a potential FSD price of US$15,000, it’s really hard to justify, but if you could go from a two-car garage, to a single-car garage, that equation gets a little easier to understand. The question is, will Tesla continue to be consumer-focused, or chase the much more lucrative robotaxi revenue??
Another great article Jason. I think just like you, I personally cannot wait for FSD to arrive in Australia.
It clearly does not make sense for Tesla to sell cars to the general public for the price of the car without FSD, when it
1.) Can not keep up with demand
2.) Can generate hundreds of thousand s of dollars from operating a robotaxi with FSD
Your point about profitability is also well made. Tesla already generates some of the highest margins in the industry. Keep in mind that all the money from FSD sales received to date has only partially been recognised as revenue and most of it still sits on the balance sheet. It gets recognised progressively, as FSD comes closer to general release. I believe this will boost margins ahead of the FSD going out of beta.
I have not followed this very closely, so I am not sure if the fact that FSD pricing will go up 25% means that another 25% of the FSD sales sitting on the balance sheet will simultaneously be recognised as revenue. However, the fact that Elon has the confidence to increase the pricing by another 25% indicates to me that FSD must be making big strides towards moving out of beta.
It is also worth noting that Tesla does not allow transfer to FSD when their vehicles are on-sold. I would not be surprised if Tesla made existing Tesla owners “an offer they could not refuse”, to buy back their vehicles once FSD moves out of beta.
Though some might want to hang on to them for sentimental reasons…
All imho