Accounting for Musk’s trillion dollar pay package, it will take TSLA 35 years to break even on FSD. The math is below.
One of the 12 items Musk needs to do to get his trillion dollar pay package is to get to 10 million FSD subscriptions. 10 million FSD subscriptions at $100/month is $12 billion per year in revenue. However, Musk gets $83 billion (1/12 of a trillion) for reaching this milestone. So that’s about 7 years of FSD revenue going straight into Musk’s pocket.
At $100/month, the margins on FSD have to be tiny. Let’s be generous and say TSLA gets 20% margin on FSD. Excluding Musk’s pay package, that’s $2.4 billion per year in profit on FSD. Accounting for Musk’s $83 billion, that means it will take 35 years for TSLA to just break even on FSD.
FSD is nothing but a way to funnel tons of money into Musk’s pocket while the shareholders get nothing.
So what I read is each tranche is 35 million shares. If the 10 million subscriptions gets paired with the $2 trillion market cap goal then that would be about $23 billion going to Musk which would drop the break-even point to 10 years. Still not good.
First, the money doesn’t come out of profits (“break-even point”), it comes out of stock dilution. You’re right about 35million shares per tranche, out of 3.33billion currently outstanding, so a 1% dilution per tranche.
But, pairing that with the first valuation goal of $2T means TSLA will have been trading at $638.65 a share for 7 months or more. So, shareholders would likely not be complaining.
Second, Tesla has to date sold 8.5 million cars to date, so they’ll hit 10 million this year, but certainly FSD adoption won’t be near 100%. At a high 50% adoption rate, it’ll take until 2031 for that operational goal to be met. Hopefully, the valuation goals will be well beyond the $2T mark by then.
At any rate, the real issue with the pay package is that the timing allows for a half-decade achievement of the lowest rungs, and TSLA at $639 in 2031 would be considered poor performance, yet Elon still would get that 1%. I think we all know Elon himself would not be happy either, with that outcome and will/is working to do much better.
Teslas, depending on age, have at least three versions of the hardware. Way back when Elon commented that some could work with the new versions of FSD but that was with the old algorithmic FSD. There was talk of upgrading but no definite policy announcement that I can think of.
The issue I see is why would Tesla owners with old, not fully functional hardware, pay the full FSD monthly fee. As far as I know IA-5 is still not in production and by the time it isTesla better come up with solutions. I expect they will.
Maintenance is not a cost of goods sold. Sell one copy and you still need to do 100% of the maintenance … maintenance which will also support a billion sold.
How does that work? Elon has to buy the shares by exercising the options. When Elon later sells the shares it’s not back to the company but to Mr. Market. Elon gets the money from Mr. Market, it’s us the shareholders who get the
And, Musk has to buy those shares at $334.09 each, so the company actually earns some money!
The new package is a stock grant rather than an option, but it does come with costs for Musk. At various points over the 10-year period, Musk would access the granted shares by paying today’s market value ($334.09 per share) or reducing the total value of the stock grant by an equivalent amount. Thus, he only receives benefits for increases in share value above the grant-date price.
