Fast Facts
- Elon Musk in March offered all of Tesla's U.S. customers a free, 30-day trial of Full Self-Driving (FSD).
- The push for FSD comes amid weakening take rates for the software package.
- Analyst Gary Black said that, once it's over, the trial could give a boost to Tesla's beleaguered stock.
Last month, Tesla (TSLA) CEO Elon Musk offered all U.S. customers (with eligible vehicles) a 30-day free trial of Full Self-Driving (FSD), at the same time demanding that Tesla staff give FSD demonstrations to all new Tesla owners.
Musk's push for FSD — which, despite its name, requires the constant hands-on, eyes-on attention of a human driver — comes as the take rates for the software package have been steadily declining. Researcher Troy Teslike found in December 2022 that the global FSD take rate for the third quarter of 2022 was just 7.4%, compared to a global take rate of nearly 50% in 2019.
Tesla currently offers two options for drivers to get access to FSD; a $12,000 one-time purchase, or a $199 monthly subscription payment.
During Tesla's fourth-quarter earnings call last year, the company said that 400,000 vehicles in North America have FSD.
Related: Top Tesla bull says it's too early to include this key area in its valuation
FSD stock boost
With only a few weeks left in the free trial, the Future Fund's Gary Black broke down the potential impact it could have on the stock.
Black estimated that an FSD take rate of 10% of the two million Tesla owners in North America potentially participating in the trial would be worth $.11 per share. If 20% of the customers currently trialing FSD buy it following the trial's conclusion, that would be worth $.22 per share.
Black said that at a 60 times price-to-earnings ratio, a 20% take rate coming out of this trial period could imply a $13 per share increase in Tesla stock, "assuming it's not discounted in Tesla stock today."
Black added that he believes Tesla should drop the subscription price to $99 per month, and the purchase price to $10,000.
"At $99/month, the FSD take rate could easily be double whatever it is today, so worth Tesla considering given the data impact and positive word of mouth of double the users," he said.
Many $TSLA investors are trying to figure out what happens when the 2.0M Tesla owners in North America who got FSD for free for a 30-day trial get to the end of their 30-day trial period at the end of April.
— Gary Black (@garyblack00) April 10, 2024
Let’s assume a 10% renewal rate at $199/month. That implies 2.0M x…
Tesla has trialed several similar FSD or enhanced Autopilot promotions over the years.
Shares of Tesla have been under pressure recently; the stock is down around 30% for the year, falling about 3% Wednesday morning.
Related: Report: Elon Musk may have killed Tesla's most appealing product
Tesla and robotaxis
This recent FSD promotion comes as Musk and Tesla seem to be pivoting more toward automation. Reuters reported last week that Musk had canceled Tesla's highly-anticipated sub-$30,000 electric vehicle, known also as the Model 2. Part of the decision behind the cancellation, which was neither confirmed nor denied by Musk, seemingly involves a stronger pivot toward Musk's planned fleet of robotaxis — despite technical and regulatory challenges — which were supposed to be developed on the same next-generation platform as the Model 2.
Musk later said in a post on X that Tesla would unveil its robotaxi on Aug. 8.
Musk at the same time reposted his eight-year-old "Master Plan, Part Deux," in which he said that a "lower cost vehicle than the Model 3 is unlikely to be necessary, because of .. the advent of autonomy."
It is in this master plan that Musk claimed that, eventually, Tesla owners with true FSD will be able to make money through autonomous robotaxi services while they sleep.
That, coming from a man who last year referred to himself as the "boy who cried FSD," has not yet come to fruition. Tesla's FSD, in fact, remains at a level two designation, meaning it requires the constant attention of the driver. Tesla would need at least a level four designation, which would not require any human intervention, to operate as a robotaxi.
Contact Ian with tips and AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
Related: What's stopping Tesla from achieving Level 3 self-driving
