that the automaker will stop selling FSD as a one-time option and will instead only offer it as a monthly subscription.
I assume Tesla has made the calculation that the subscription model increases the revenue stream over the long term.
Likely more folks will sign up due to the reduced initial cost methinks. Also a subscription will be popular to consumers that change vehicles fairly often.
Perhaps this will allow them to sell different tiers of the option: “full self driving” (which is not really full), ‘full+ self driving” (closer to the total package) and “really full self driving”, which is the tier just before “RoboTaxi”.
(And i think the monthly, if you don’t have to commit for a year, would be popular for people going on long trips or to otherwise sample a product that costs $8000 for the full boogey.)
That’s one possibility. There’s a second one, if you’re inclined to skepticism. That now that they’ve finally been racking up some more serious real-world miles trying to run their cars at L4, rather than having a driver take over, they’ve discovered something(s) that make them realize that they’ll need different hardware for an L4/L5 car than they have on offer today. Or that they’re not anywhere close to true L5, so they’ll always need to be part of a support network to be run autonomously - which doesn’t really work for a purchase option. So selling FSD with the promise that it can move to L4/L5 with a software update becomes very problematic.
They’ve made that promise to a bunch of prior purchasers, which might impose some liability if they end up requiring different hardware to make L4/L5 work. But as noted in the article, removing the purchase option at least keeps that liability pool from growing.
Here’s a third possibility. Maybe they need more cash flow now.
December was a free month so hopefully a lot of people who were already owners got to try it in their everyday driving.
The subscription idea is actually fairly recent (and the one-time used to be $12k).
Some will buy the 80-month package before that offer ends. Others will have tried it out and realize how useful it is and pay the $100 thinking they will cancel for months they don’t need it. And then discover there are no such months. It gets into your driving habits quite quickly.
Like the drug pushers - ‘first one’s free’
And it’s only $99 - not so much to people who can afford a Tesla.
But…how does eliminating the sales option help with cash flow? They’re not adding the subscription option - that’s been in place for many years now. They’re just taking away the purchase option. Even if it has a low take rate, even a single purchase is the equivalent cash flow of 80 subscriptions in the current month - so losing even the handful of folks who were making that choice would seem to reduce present cash flow, not help it.
Another deeply cynical take I saw suggested that since Musk’s pay package is tied to subscriptions, they need to stop the purchase option now. I think that’s highly unlikely, since I would be shocked if the fine print on Musk’s package didn’t treat a purchase as being equal to a sub.
My thought was that removing the purchase option next month would stimulate current subscribers to buy.
Buy now while you still can.
So, a certain percentage of next month’s revenue will be increased by 80.
And the free December month will stimulate a certain number of new subscriptions.
Ah. I didn’t realize that there was a window to beat the clock. Yes, that dynamic might actually work - then you would be pulling some of that longterm revenue forward.
I’m skeptical that the current consumer-available hardware is sufficient for autonomy, even Robotaxi autonomy (forget about Tesla consumer-owned autonomy, that is a fantasy for now - let’s see them solve corporate-fleet autonomy first, in any geofence).
I’m skeptical current hardware is sufficient for 3 reasons:
I cannot cite smoking gun evidence on the above, only:
Tesla has a distinct opportunity to update their hardware with Cybercab. If that hardware gets meaningful upgrades, then that’s more evidence that current hardware might not be good enough, or as good as they want, for autonomy. This might be difficult to ascertain if Cybercab is not available for third party inspection, no idea.
One of the 12 tranches of Musk’s $1 Trillion pay package requires “10 million vehicles operating FSD”. It’s one of the overarching conditions that must be satisfied for the entire package to vest fully.
Dropping the FSD price to $5/month would get to that goal a little faster.
intercst
One of the least recognized abilities of Elon Musk is cash management. I view this change of policy in this light.
When FSD was first introduced Tesla didn’t have the Cash Horde it has today and it needed cash ASAP to fund its development. Now, with its huge Cash Horde, Tesla can shift to a more profitable long term policy.
The Captain
{{ The important thing to note is that Tesla would benefit from a higher take rate, as more drivers using it would result in more data, which would help the company reach its recently-revealed 10 billion-mile threshold to reach an Unsupervised level. It does not cost Tesla anything to run FSD, only to develop it. If it could slice the price significantly, more people would buy it, and more data would be made available.
intercst