Tesla has once again made significant changes to the pricing structure of its controversial Full Self-Driving (FSD) software. In the United States, the cost of FSD has been reduced by $4,000, bringing the price down to $8,000 from its previous $12,000 price point. Canadian customers also benefit from this price drop, with the cost of FSD now at $11,000CAD, a significant decrease from the previous $16,000CAD.
In addition to the FSD price reduction, Tesla has streamlined its offerings by eliminating the “Enhanced Autopilot” option, which previously cost $6,000. For owners who have already purchased Enhanced Autopilot, the cost to upgrade to FSD has been reduced to $2,000, down from $6,000.
These price cuts come on the heels of several other recent changes to Tesla’s pricing strategy. Just a day ago, the company reduced the price of most of its vehicles by $2,000, and a couple of weeks ago, it cut the price of its FSD subscription service in half, to $99 per month. However, the company is still charging some owners $1,000 for hardware they have already paid for, which has drawn criticism.
The recent reduction in the FSD subscription price made the previous $12,000 upfront cost seem excessive, as a customer would need to subscribe to the service for ten years to reach the same total cost, not accounting for the time value of money. This disparity led to speculation that customers would opt for subscriptions rather than upfront purchases.
The new $8,000 price point for FSD brings the upfront cost closer to the subscription model, equating to approximately 6 2/3 years of subscriptions at $99 per month. While this is more reasonable, it still exceeds the typical length of car ownership for many people and does not account for the time value of money.
Tesla CEO Elon Musk has consistently stated that as FSD becomes more capable, its price should increase to reflect its greater value. In the past, FSD price increases were primarily associated with software updates that added new capabilities to the system. Musk has even suggested that Tesla cars with FSD could be considered “appreciating assets,” potentially worth $100,000 to $200,000 due to their value as robotaxis. However, Tesla’s inconsistent valuation of FSD, particularly when offering trade-in estimates to owners, has drawn criticism.
The recent move to lower FSD prices may be less about the system’s capabilities and more about boosting revenue during a challenging period for the company. Tesla recently reported disappointing quarterly delivery numbers and laid off 10% of its workforce. By offering FSD at a lower price, the company may be able to incentivize owners to purchase the software, providing a much-needed cash infusion.
The capabilities of FSD have also been evolving. Tesla has been pushing the system more aggressively since the release of FSD v12, which Musk described as “mind-blowing.” The new version significantly changes the system’s back-end, utilizing machine learning neural nets to analyze vast amounts of driving data and teach cars to drive themselves.
With increased confidence in the new system, Tesla recently offered a free one-month trial of FSD to all Tesla owners in the US throughout April. The company has also started referring to the system as “Supervised Full Self-Driving,” a somewhat contradictory name that nevertheless more accurately reflects the fact that FSD is still a “Level 2” system, requiring constant driver attention and not taking full responsibility for the dynamic driving task.
While the price drop has been implemented in the US and Canada, it has not yet been reflected in all other territories. In the UK, FSD is still listed at £6,800, and in Norway, it remains at 59,600kr. Interestingly, after accounting for exchange rates, FSD is now more expensive in some EU countries than in the US, despite having fewer capabilities in those markets.
As Tesla continues to refine its pricing strategy and the capabilities of its Full Self-Driving software, it remains to be seen how these changes will impact consumer adoption and the company’s overall financial performance. The ongoing debate surrounding the safety, reliability, and ethical implications of autonomous driving technology is likely to persist as the industry continues to evolve.
