Analysis of the price-hike for FSD, and the options it allows Tesla

[bradtem]

Most should have seen that Tesla is bumping the FSD pre-order price to $15K. This is odd with a product which isn't there yet, and has a resale price of around $3K to $4K in the used market, with a declining global take rate now at 7%.

I explore these price factors, and also consider the option the high prices offer to Tesla -- that even if they fail to make FSD work (as many fear) this is so much money that with their stock wealth they could buy a company that does make it work (almost any company except Apple and Alphabet) and install LIDARs (while biting their teeth) and other sensors in existing cars and still make a profit. Giving them a win either way. Could the price increase suggest they want to be ready for that?

You can read this in my Forbes site column today at Tesla Raises ‘FSD’ Price To $15K. Does It Signal They Are Giving Up?

 

[glide]

Most should have seen that Tesla is bumping the FSD pre-order price to $15K. This is odd with a product which isn't there yet, and has a resale price of around $3K to $4K in the used market, with a declining global take rate now at 7%.

I explore these price factors, and also consider the option the high prices offer to Tesla -- that even if they fail to make FSD work (as many fear) this is so much money that with their stock wealth they could buy a company that does make it work (almost any company except Apple and Alphabet) and install LIDARs (while biting their teeth) and other sensors in existing cars and still make a profit. Giving them a win either way. Could the price increase suggest they want to be ready for that?

You can read this in my Forbes site column today at Tesla Raises ‘FSD’ Price To $15K. Does It Signal They Are Giving Up?

It sure is “odd”. It feels like they are trolling at this point.

 

[bradtem]

It sure is “odd”. It feels like they are trolling at this point.

Trolling what, exactly? You accuse me of saying things I don't actually believe in order to get attention? What thing is it you think is the issue?
Whoops, my bad, I thought you were accusing me of trolling.

 

[Tam]

...Tesla Raises ‘FSD’ Price To $15K. Does It Signal They Are Giving Up?

That's a very interesting theory. It's a great article. Thanks for sharing.

It sure is “odd”. It feels like they are trolling at this point.

When I first saw the title, I thought it was very strange. It's very contradictory.

After all, if Tesla can increase its price, it's a success and not a failure, so what's that "giving up" all about?

However, after I read it, it makes total sense.

 

[2101Guy]

Nice article..one small grammatical error with this sentence though. Might want to edit..

If Tesla doesn’t make more money from the price increases, they can still them to convey a strong impression that the product is improving and thus its present value is greater — and it is indeed improving, though still nowhere remotely close to being ready to ship.

 

[2101Guy]

This paragraph fails to mention that if a consumer purchases a used Tesla from a third party lot (Vs directly from a person), it's not unheard of for the FSD feature to disappear weeks later from the car when Tesla finds out, and removes it via over the air update


Analysis of used party Tesla sales shows results are all over the map. Some buyers will pay more for FSD cars, and it is reported that they sell for an amount that’s about 25% of the price to add FSD to either a new or used car — under $3,000. It is not unusual to see Teslas on the used market selling for a very similar price with or without FSD. This has led the various companies which provide estimated values for used cars to add modest value for the option. A query of the Kelly Blue Book on a 2020 Tesla Model 3 SR+ with 20K miles shows a difference of $4,300 for the $12,000 option. This is striking when some people are buying used Teslas without the package and then paying Tesla the full $12,000 (soon $15,000) to enable it, yet others are getting lucky and finding a car which already has it for a very modest premium.

 

[Tam]

Trolling what, exactly? You accuse me of saying things I don't actually believe in order to get attention? What thing is it you think is the issue?

Come on... Admit it

Here's the proof in the picture included in the article: The FSD beta Blue Path Depictor shows that it's in the LEFT turn-only lane, while the routing map shows that it needs to turn RIGHT!

This is why Tesla removed the radar to reduce the confusion about sensor fusion. Now, there are still 2 confusing decisions, what should be removed next?

Anyway, Tesla is trolling us because they should have fixed this kind of mistake first before raising the price to $15,000.

Photo: Forbes

 

[glide]

Trolling what, exactly? You accuse me of saying things I don't actually believe in order to get attention? What thing is it you think is the issue?

I think Tesla is trolling with a $15K price on FSD.

 

[nvx1977]

It sure is “odd”. It feels like they are trolling at this point.

Trolling what, exactly? You accuse me of saying things I don't actually believe in order to get attention? What thing is it you think is the issue?

I thought Glide was saying that Tesla is trolling with its price increase.

 

[bradtem]

I thought Glide was saying that Tesla is trolling with its price increase.

My bad. I would not say they are trolling, though.

 

[Dewg]

It's important to remember that Tesla does not get to realize much of the FSD purchase price. They are sitting on millions if not billions of unrealized gains due to GAAP rules. It's in their best interest to "solve" FSD and release it so they can convert the depreciated money to revenue.

 

[bradtem]

It's important to remember that Tesla does not get to realize much of the FSD purchase price. They are sitting on millions if not billions of unrealized gains due to GAAP rules. It's in their best interest to "solve" FSD and release it so they can convert the depreciated money to revenue.

Actually, I suspect one reason they now have EAP for $6K is that by doing so, they can realize at least $6K of the revenue from FSD. A little more because they also give you stop lights with FSD and they can invent a price for that. Even if you feel EAP is $3K of the value and FSD is the rest.

 

[Tam]

It's important to remember that Tesla does not get to realize much of the FSD purchase price. They are sitting on millions if not billions of unrealized gains due to GAAP rules. It's in their best interest to "solve" FSD and release it so they can convert the depreciated money to revenue.

If there's a way to get money from customers, even if there's a GAAP restriction which I have no idea, Tesla would do it such as the recent EAP offer for $6,000.

 

[Dewg]

Actually, I suspect one reason they now have EAP for $6K is that by doing so, they can realize at least $6K of the revenue from FSD. A little more because they also give you stop lights with FSD and they can invent a price for that. Even if you feel EAP is $3K of the value and FSD is the rest.

You're very likely right!

 

[AlanSubie4Life]

Most should have seen that Tesla is bumping the FSD pre-order price to $15K. This is odd with a product which isn't there yet, and has a resale price of around $3K to $4K in the used market, with a declining global take rate now at 7%.

I explore these price factors, and also consider the option the high prices offer to Tesla -- that even if they fail to make FSD work (as many fear) this is so much money that with their stock wealth they could buy a company that does make it work (almost any company except Apple and Alphabet) and install LIDARs (while biting their teeth) and other sensors in existing cars and still make a profit. Giving them a win either way. Could the price increase suggest they want to be ready for that?

You can read this in my Forbes site column today at Tesla Raises ‘FSD’ Price To $15K. Does It Signal They Are Giving Up?

I think in general your idea is possible, though not sure I agree on the specifics.

I don’t think it is clear at all that anyone will be able to solve the FSD problem with new sensors. It takes a lot more than that, of course, and the focus on sensor replacement/retrofit in the article hides that somewhat.

Additionally there’s the question of what they have to deliver (an L2 system, which seems “easy” on paper) and what will be needed for that. Would even the Waymo systems be safe as L2 in a wide open ODD? Maybe not! They could be only dangerously good! So it is not clear there is anything out there Tesla could buy.

It just doesn’t seem like anyone is imminently going to solve self-driving. If they could, then maybe this theory would hold up, but in that case, I don’t think hacking on a bunch of sensors seems likely (I could see camera, computer, and radar replacements). Anyway, getting to L2 performance with adequate safety with the existing state of the art in a fairly broad ODD still seems very questionable.

It’s really a bizarre situation, with an uncanny valley (except one eliciting undeserved trust, rather than disgust as it normally would) in the middle of the development trajectory.

Hopefully at some point they’ll just throw in the towel and shoot for highway L3. Also not clear if that is possible.

My prediction is that it will be more clear in about 3-4 years.

 

[bradtem]

I think in general your idea is possible, though not sure I agree on the specifics.

I don’t think it is clear at all that anyone will be able to solve the FSD problem with new sensors. It takes a lot more than that, of course, and the focus on sensor replacement/retrofit in the article hides that somewhat.

Additionally there’s the question of what they have to deliver (an L2 system, which seems “easy” on paper) and what will be needed for that. Would even the Waymo systems be safe as L2 in a wide open ODD? Maybe not! They could be only dangerously good! So it is not clear there is anything out there Tesla could buy.

It just doesn’t seem like anyone is imminently going to solve self-driving. If they could, then maybe this theory would hold up, but in that case, I don’t think hacking on a bunch of sensors seems likely (I could see camera, computer, and radar replacements). Anyway, getting to L2 performance with adequate safety with the existing state of the art in a fairly broad ODD still seems very questionable.

It’s really a bizarre situation, with an uncanny valley (except one eliciting undeserved trust, rather than disgust as it normally would) in the middle of the development trajectory.

Hopefully at some point they’ll just throw in the towel and shoot for highway L3. Also not clear if that is possible.

Well, if nobody's going to solve it for a very long time, then Tesla could either admit that (and partially refund) or just say they are plugging on.
But many teams (including Tesla) are betting large amounts they will solve it, and the article discusses what happens if they do (with different sensors perhaps) while Tesla does not.

Only an actual self-driving system is under consideration here, not driver assist.

But there are a few outcomes:

1. Tesla makes FSD work with just vision. Hooray for them, they do very well
2. Somebody else makes it work with just vision (Tesla probably buys them)
3. Somebody else makes it work with more sensors, but Tesla can't make it work. Tesla can buy one of these companies if it's not Alphabet or Apple.
4. Others make it work, and so does Tesla. Let the competition begin.
5. Nobody makes it work -- and some give up but certainly not all.

Highway standby driving (so called level 3) seems very doable, but is only a luxury feature. Tesla could not sell it as fulfilling FSD, but they might still sell it as an add-on -- who knows, maybe even to FSD customers though they would be mad. It does not enable robotaxi, which is the game changer.

 

[S4WRXTTCS]

The price increase does three things:

It creates an artificial sense that they're achieving something valuable with FSD even if they far from the actual goal.
It lowers risk exposure due to fewer people getting it without reducing income from it. They're likely pull in just as much money as before.
It increases re-occurring revenue long term as those that don't get it will simply subscribe later on.

All in all I think it's a non-story as ultimately it's just Elon pumping the hype machine.

We'll know the price actually increased when they increase the subscription pricing, and they either stop people from buying FSD entirely or they make it so prohibitively expensive that only insanely rich people get it.

 

[Dewg]

Well, if nobody's going to solve it for a very long time, then Tesla could either admit that (and partially refund) or just say they are plugging on.
But many teams (including Tesla) are betting large amounts they will solve it, and the article discusses what happens if they do (with different sensors perhaps) while Tesla does not.

Only an actual self-driving system is under consideration here, not driver assist.

But there are a few outcomes:

1. Tesla makes FSD work with just vision. Hooray for them, they do very well
2. Somebody else makes it work with just vision (Tesla probably buys them)
3. Somebody else makes it work with more sensors, but Tesla can't make it work. Tesla can buy one of these companies if it's not Alphabet or Apple.
4. Others make it work, and so does Tesla. Let the competition begin.
5. Nobody makes it work -- and some give up but certainly not all.

Highway standby driving (so called level 3) seems very doable, but is only a luxury feature. Tesla could not sell it as fulfilling FSD, but they might still sell it as an add-on -- who knows, maybe even to FSD customers though they would be mad. It does not enable robotaxi, which is the game changer.

Check out @diplomat33 posts regarding MobilEye. They are doing some vision-only systems (SuperVision) that are impressive.

 

[AlanSubie4Life]

Only an actual self-driving system is under consideration here, not driver assist.

Well that does complicate things in terms of incentives for Tesla, since they are selling driver assist with this package, and not actual self-driving.

The “Full” in the title of the feature refers to the Full responsibility of the driver, as I have always interpreted it. You are “Fully Driving Yourself”, as is required for an L2 system.

To be clear, an L2 system like this could be fantastically difficult to implement. Not sure it is possible.

I’m not sure what impact that has on your article though. Obviously at some point if someone actually solves true, actual self-driving, then everyone will want to have that as an option to offer to people. Or we will just mostly use robotaxis. Not sure. And FSD will not be very relevant at that point. Or it will be updated to include those L3/L4 features. (TSD? TFSD? FSD 2.0? I don’t know.)

 

[S4WRXTTCS]

It's important to remember that Tesla does not get to realize much of the FSD purchase price. They are sitting on millions if not billions of unrealized gains due to GAAP rules. It's in their best interest to "solve" FSD and release it so they can convert the depreciated money to revenue.

The problem with this is all Tesla has to do is release FSD Autosteer on city streets to realize those unrealized gains on FSD sold after March 2019 (approx).

That's the last remaining item.