Earlier this month, Tesla FSD (Full Self-Driving), was made available to all Tesla owners. For free. If you’re unfamiliar, this is the company’s autonomous driving feature.
When I first bought my Tesla, I had the option of purchasing FSD for $15,000. While I’m enthusiastic about FSD, I couldn’t really justify the cost. I suspect a lot of folks are like me in that respect, too.
But last week we learned that Tesla will now be offering FSD for $99/month. For those keen on FSD, such a price cut is likely to be a motivator to pony up for it. Certainly a good thing for Tesla, given some of the pressure the stock has experienced over the past couple years. After all, if just 2 percent of all U.S. Tesla owners sign up, Tesla’s looking at roughly $68.9 million a year in FSD subscription revenue. Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Of course, we don’t yet know how many Tesla drivers Uncle Elon will be able to convert. Two percent could be high, it could be low. We won’t know for certain until later in the year. But it is interesting that Tesla has found yet another way to generate revenue outside of just selling cars.
I say “another way,” because the company also generates revenue through its Supercharger network.
Last year, Wedbush Securities analyst Dan Ives put out a note that suggested Tesla’s Supercharger network will generate as much as $20 billion in yearly revenue by 2030. I believe it’ll be higher now that more legacy automakers have signed on to use Tesla’s charging network.
And let’s not forget what the company pulls in from its premium connectivity service, which costs drivers $9.99/month. While it’s not necessary if you have a cell phone and bluetooth, it is quite convenient and allows you to take full advantage of the company’s …
- Navigation system
- Live traffic visualization
- Live camera feature
- Video and music streaming
- Internet browser
There’s not any clear data on how much this brings in as it falls under “services and other revenue.” This includes things such as:
- Non-warranty (after sales) vehicle services and parts
- Vehicle insurance
- Retail merchandise
- Charging revenue
- Premium connectivity service
But if we assume the same 2 percent conversion rate, based on the number of Teslas on U.S. roads today, we’re looking at nearly $7 million in additional recurring revenue.
By 2030, I predict Tesla will have a minimum of 5 million operational passenger vehicles on U.S. roads. This would result in approximately $118.8 million in annual revenue from Tesla FSD subscriptions and $11.9 million in annual revenue from premium connectivity.
That’s more than $130 million a year from nothing more than subscription fees. And that’s in addition to a minimum of $20 billion a year from charging services. To put that in perspective, that would equate to more than 20 percent of Tesla’s 2023 revenue.
That’s not trivial. Some have even suggested that Tesla could eventually use its cars much in the same way telecom companies use phones. Almost as a loss-leader, with the real money coming from subscription services.
I’m not sure if this model could carry over into the automotive industry based on what it costs to build an actual car these days. But that, too, is changing.
Tesla FSD Could be a Big Money Maker
Earlier this year, Tesla reps spoke about a new manufacturing process called “unboxed.” As reported in Bloomberg, the process is similar to building Legos compared to the traditional production line, which really hasn’t changed much in 100 years.
Instead of a large, rectangular car moving along a linear conveyor belt, parts are assembled simultaneously in dedicated areas and then all put together at the end. Tesla says the change could reduce manufacturing footprints by more than 40%, allowing the carmaker to build future plants far faster and at less expense.
This type of manufacturing process could realistically cut production costs by more than 30%. Then consider that battery costs could fall by as much as 40% by 2030.
With such extreme reductions in costs, it’s not out of the question to assume that Tesla (and perhaps other EV makers, too), could eventually be able to further cut vehicle costs while deriving more revenue from annual subscription services and software upgrades.
I realize this may be a bit hard to wrap your head around. But so was the idea of electric cars gradually swiping market share from traditional internal combustion vehicles. And we know that by 2030, roughly half of all new cars sold in the U.S. will be electric. So this is happening.
Given Uncle Elon’s track record of disruption in the automotive space, not to mention space travel, Internet services and fully implantable brain-computer interfaces (yes, that’s a REAL thing now), I wouldn’t put it past Tesla to be the first automaker to accomplish such a monumental feat. And Tesla FSD could be a big part of that.
Of course, this is all projection. It’ll be at least another 5 or 6 years before we can really validate such a claim. But as I’ve always said, it’s never a good idea to bet against Elon Musk.
Although Tesla’s stock has taken it on the chin recently, that doesn’t mean the company isn’t extremely valuable as a long-term proposition. I’m not saying you should rush out to buy shares of Tesla today. But I am suggesting you keep a little powder dry just in case the stock sinks to unjustifiable lows.
In fact, I would highly recommend you sign up for our discord channel, as it is a place where I will alert you to any potential buy alert for Tesla, as well as dozens of other stocks that are currently, or will soon be trading at a discount.
