Tesla’s Full Self-Driving Subscription: Predicting the Potential Cost and Who It Will Benefit

May 12, 2020   

Elon Musk revealed during a conference call that followed Tesla’s Q1 2020 Earnings Report that Tesla is planning to offer Full Self-Driving as a subscription model in the future. We predict the potential cost associated, and whether it will make more sense to purchase Full Self-Driving as an option today or wait until later this year to add it as a subscription.

Musk emphasized that “it will still make sense to buy FSD as an option as in our view, buying FSD is an investment in the future. We are confident that it is an investment that will pay off to the consumer, to the benefit of the consumer. In my opinion, buying FSD option is something people will not regret doing.”

We agree with that statement for two types of consumers: consumers that want to have their car drive them to work every day and be generally utilized as their own personal taxi, and consumers that like to be early adopters on the cutting edge of technology.

There is no downside to purchasing Full Self-Driving upfront provided that Tesla is able to truly make it feature-complete within a reasonable timeframe. The subscription itself won’t be available until the end of this year, which implies that we should see more features rolled out soon.

Tesla CFO Zachary Kirkhorn added that “financially, rolling the upfront purchase of the FSD option into a loan in the vehicle or a lease will be the least expensive plan on a monthly basis to own, plus you preserve the option value of increased value over time.”

The cost of Full Self-Driving upfront is currently $7,000 but is expected to increase over time. Financing the option today over 72 months yields an added monthly cost of $97.22, before interest charges are applied.

A subscription would have to be at least $149/month to be less favorable than purchasing FSD upfront. In our opinion subscription options may range from $149-$299/month, perhaps purchased in intervals of multiple months or even a year at a time.

Another possibility would be a pay-as-you-go model. There are a variety of uses for this scenario, as it would effectively enable owners to use their own car as an “Uber.” The average cost per mile of a trip in an Uber is $1-$2/mile, so we would imagine the pay-as-you-go cost to be on the lower end of that range, as the consumer is using their own personal Tesla. This could make the most sense to consumers that only have an occasional use for FSD. (It would be interesting to find out what rate miles traveled back and forth would be charged at for consumers that use Summon to drop them off then subsequently pick them up.)

Either option would recoup millions of dollars of revenue per month that would have otherwise been lost for Tesla, so offering multiple models for Full Self-Driving benefits both Tesla as well as the consumer.


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