Equities

Tesla Halves FSD Price to $99, Amid 31% Stock Dip

Tesla slashes FSD subscription to $99, aiming to boost adoption amid competitive and regulatory challenges.

By Barry Stearns

4/13, 11:47 EDT
Tesla, Inc.
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Key Takeaway

  • Tesla slashes FSD subscription from $199 to $99, aiming to boost adoption amid 31% stock decline this year.
  • Wall Street adjusts Tesla's earnings estimates down for 2024, reflecting challenges in delivery growth and FSD adoption.
  • Upcoming robotaxi event on August 8 stirs anticipation but faces skepticism due to past delays and competitive pressures.

FSD Price Adjustment

Tesla has announced a significant reduction in the subscription price of its Full Self-Driving (FSD) package in the United States, from $199 to $99 per month. This adjustment comes as a surprise, especially considering CEO Elon Musk's previous statements that the cost of FSD would increase as the system evolved towards full autonomy with regulatory approval. Musk had even suggested that the value of FSD could exceed $100,000 per car. The FSD system, which can perform a variety of driving tasks such as lane changes and navigating around objects, requires constant supervision by a human driver. Despite its capabilities, the system's high initial price tag has been a barrier to wider adoption among Tesla's customer base, which includes approximately 2.5 million vehicles on U.S. roads.

Market Reactions and Expectations

The price cut is introduced amidst a one-month free FSD trial offered by Tesla, aiming to boost adoption rates. Gary Black, cofounder of Future Fund Active ETF, expressed support for the price reduction, anticipating it would lead to increased adoption. Wall Street analysts have adjusted their earnings estimates for Tesla, with 2024 projections now at about $2.70 a share, down from $4.90 a year ago, amid flat delivery expectations compared to the previous year. Tesla's stock has experienced a decline of about 31% this year, though it saw a 4% increase in the past week, potentially buoyed by Musk's announcement of a Tesla robotaxi reveal event scheduled for August 8.

Challenges and Competitor Landscape

Tesla's move to lower the FSD price contrasts with Musk's ambitious promises regarding autonomous driving capabilities and the potential for Tesla vehicles to operate as robotaxis. The discrepancy between these promises and the current state of Tesla's technology has led to scrutiny, including accusations of deceptive marketing practices by the California Department of Motor Vehicles. Meanwhile, competitors like Alphabet's Waymo, Didi's autonomous unit in China, and Amazon's Zoox in the U.S. are advancing in the commercial deployment of robotaxi services, intensifying the competitive landscape for Tesla.

Customer Feedback and Future Prospects

The decision to mandate sales and service staff to install and demo FSD for customers, along with the offer of a one-month free trial, has elicited mixed reactions. While some Tesla owners are impressed, others have expressed safety concerns, opting out of the trial. The upcoming robotaxi unveiling on August 8 adds to the anticipation surrounding Tesla's autonomous driving initiatives, though past delays in moving from unveiling to production have led to a cautious market outlook. The permanence of the recent FSD price cut remains unclear, contributing to the uncertainty regarding Tesla's strategy in the autonomous driving space.

Street Views

  • Gary Black, Future Fund Active ETF (Bullish on Tesla's FSD adoption):

    "We’ve been calling for a reduction to $99 per month."