Tesla’s car price goes up after software

At $5,000 in 2018, $10,000 in 2020 and $15,000 in 2022, Harga Mobil tesla di Indonesia‘s fully automated driving system has tripled in just three years. Musk is more interested in raising the price of the system than in making money from it, which is still far from the “$100,000” value he has in mind. But it is also the system that has made Tesla’s safety so controversial. Apart from Musk and Tesla’s “warriors of faith”, I wonder how many people will pay for the constant price hikes.

25% increase

After Tesla has repeatedly adjusted the price of its cars this year, the company’s software system has also caught the wind of this price increase. On Sunday, local time, Musk announced on his Twitter account that the company’s fully automated driving system (FSD) would be priced 25% higher in North America, from $12,000 to $15,000, starting on September 5.

It is understood that the AP feature, the standard driver assistance package for Autopilot, is currently standard on Tesla-branded models. However, the higher-end FSD fully automated driving system is a paid-for feature, with the latter adding Autopilot navigation, automatic lane changing, automatic parking, summoning and traffic light and stop sign control to the standard driver assistance features of Autopilot.

The FSD was priced at $5,000 when it was first launched in 2018, doubled in price straight away to $10,000 by 2020, and then raised the price to $12,000 this year. And this is the second time so far this year that Tesla has increased the price of the FSD.

According to Musk, the price increase will be implemented after the widespread release of FSD Beta 10.69.2 of the system. For orders placed before September 5, the current price of $12,000 will be implemented, but delivery of orders will be a little later.

In Musk’s eyes, the FSD price is “ridiculously cheap” relative to its value. He said that by the end of this year, Tesla’s electric cars could be truly “fully autonomous” with the FSD.

The prospect of self-driving and fully autonomous cars is already a major reason for Tesla’s high valuation. According to Tesla’s full-year 2021 earnings report, the services and other business, including the self-driving software, achieved revenue of US$3.802 billion, an increase of 65% year-on-year, accounting for 7.06% of total revenue.

Some users believe that the Tesla FSD is too expensive even if it is able to achieve the so-called fully automated driving system. Currently, Tesla’s cheapest Model 3 standard range upgrade starts at $39,999,000 in North America. And with the price increase, users will have to pay close to half the price of buying the car again to upgrade to the FSD.

Hardware for all, software for all

Compared to the “raw material cost pressure” when the car rises, the price increase of the software system seems somewhat unexplained. Yang Dong, a deputy researcher at the State Intellectual Property Office, told Beijing Business News that, in the long run, Tesla’s moves to build user beliefs, reduce costs for modular hardware, and reduce prices to expand the user circle have been to take the route of popularizing hardware and charging for software. Eventually, it is bound to go to software fees to make money, only software to make money may run through the software ecology, the next step is bound to be a variety of fancy features to split the fee, and even attract third-party developers to enter. This can also be compared to the Apple ecology.

The financial science writer Xie Zongbo believes that right now Musk may not expect to get higher income from the price increase, but more to establish the value of the FSD software anchor, to establish the leading position in the field of autonomous driving. Musk has repeatedly said that the FSD is worth more than $100,000. The current selling price is clearly a long way from that value judgement. For this reason, Tesla needs to keep raising the value of the FSD in the minds of consumers by increasing the price.

It is worth noting that there is another way of charging for the system. Prior to this price increase, customers could pay a monthly subscription fee of $199 in addition to paying the full $12,000 for the FSD software. On this basis, a one-off payment of US$12,000 would be equivalent to 470 months of subscription, which means a monthly payment would be enough to last 39 years, not taking into account inflation.

According to Xie Zongbo, this also represents an aggressive push by Tesla to move FSD from a one-time front-end fee model to a subscription service ongoing fee model. The purpose of the non-stop price increase for one-time purchases is not really to sell the FSD software, but to anchor the value by doing so, thus enhancing the attractiveness of the monthly subscription service and bringing in more subscription revenue.

In the long run, once user habits are established, Tesla’s software subscription revenue will become a new long-term stable revenue stream. Xie Zongbo further analysed that this revenue could even exceed the profit from buying the car itself and become a major source of profit and cash flow for Tesla in the future.

Indeed, Musk has predicted that self-driving software will become Tesla’s most important profit point. He said at the end of January this year that Tesla’s most important product this year and next year would not be cars, but software to support autonomous driving and robotics. He also revealed that Tesla engineers were working on a humanoid robot called Optimus Prime, which is expected to be launched next year.

Who pays

Beyond the price, the safety of Tesla’s Autopilot has also been caught in a maelstrom. Figures from the US website Techcrunch show that around 100,000 cars are now equipped with FSDs, a number that has remained steady in the first half of the year. The website also says that although FSDs are called “fully automated driving”, they do not mean that they do not really need to be controlled by a human; the driver needs to be alert at all times and take over control of the vehicle when needed.

This is why the California Department of Motor Vehicles (DMV) recently accused Tesla of falsely advertising the FSD and Autopilot features. basis.” The agency is currently reviewing the FSD software.

This allegation could affect Tesla’s car sales business in California. If the regulator is successful in its complaint to the California Office of Administrative Hearings, Tesla’s licence to manufacture and sell cars in California could be suspended or revoked.

In addition, a report released by the National Highway Traffic Safety Administration (NHTSA) in June this year showed that Tesla’s electric cars were involved in 70 per cent of accidents involving driver-assist technology, 60 per cent of accidents resulting in serious injuries and 85 per cent of accidents resulting in fatalities.

For Tesla’s Autopilot system price increase and the accident investigation it is facing, Beijing Business News reporter contacted Tesla, but had not received a reply by press time. And Ashok Elluswamy, director of Tesla’s Autopilot software, has said that Tesla’s Autopilot automated assisted driving system prevents about 40 accidents caused by sudden unintended acceleration (SUA) every day.

He said that in about 40 of these accidents, drivers mistakenly hit the accelerator instead of the brakes, but Autopilot was able to “realise” they were doing so and stop the vehicle automatically when a collision was imminent, preventing the accident from happening.

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