Tesla has recently announced a significant price reduction for its controversial Full Self-Driving software, slashing $4,000 off the previous price tag. In the United States, buyers can now acquire the Full Self-Driving (FSD) Capability for $8,000, down from the previous $12,000 cost.
The inside of a Tesla vehicle is viewed as it sits parked in a new Tesla showroom and service center in Red Hook, Brooklyn on July 5, 2016 in New York City.
Navigating Tesla's Price Adjustments
Tesla's reduction applies to both US and Canadian markets, where buyers in Canada will now pay $11,000 for the FSD package. In addition to slashing prices, Tesla has discontinued its "Enhanced Autopilot" option, which previously carried a $6,000 price tag.
For existing owners with Enhanced Autopilot, Engadget reported that the cost to upgrade to Full Self-Driving (FSD) has been reduced to $2,000 from $6,000.
Tesla has been on a streak of price reductions lately, having recently lowered the prices of most of its vehicles by $2,000 just one day ago. The company halved the price of its FSD subscription service to $99 per month a couple of weeks ago.
However, some owners are still being charged $1,000 for the hardware they've already purchased. The previous $12,000 price tag for FSD suddenly appears exorbitant.
A subscriber would need to maintain FSD for ten years to reach a total cost of $12,000, not factoring in the time value of money.
With the recent price reduction, it was only natural that consumers gravitated toward subscription models rather than one-time purchases.
To bridge the gap further, Tesla has now lowered the price of Full Self-Driving to $8,000. That translates to approximately 6 and 2/3 years' worth of subscriptions at $99 per month.
While this makes the option more accessible, it still exceeds the typical ownership period for many drivers, considering the time value of money.
This marks a significant decrease from the peak price of Full Self-Driving, which reached $15,000 between late 2022 and late 2023 before being reduced to $12,000.
Elon Musk, CEO of Tesla, has consistently emphasized that as the capabilities of FSD improve, its price should also increase to reflect its enhanced value. Previously, price hikes for FSD were often linked to software updates that introduced new functionalities to the system.
Musk has suggested that Tesla vehicles equipped with FSD could potentially appreciate in value, becoming "appreciating assets" valued at $100,000 to $200,000, particularly as potential robotaxis.
However, Tesla selectively uses these valuation figures, as the company tends to assign FSD less value when providing trade-in estimates to vehicle owners.
From a pragmatic business perspective, this decision to reduce FSD prices is likely motivated less by advancements in the system's capabilities and more by the need to bolster revenue during a challenging period for the company.
Tesla's Strategic Maneuvers
Tesla recently reported disappointing quarterly delivery figures and implemented a 10% workforce reduction. Lowering the price could encourage owners to invest in software that had previously seen consistent price increases, providing Tesla with an injection of cash flow.
Tesla has been intensifying its focus on FSD since introducing the highly acclaimed FSD v12. This latest version substantially changes the system's infrastructure, incorporating machine learning neural networks to analyze Tesla's extensive driving data to advance autonomous driving capabilities.
