With the beta for Full Self-Driving (FSD) out in the wild, Elon indicated today that the price of FSD would increase to $10k. Tesla cars keep getting cheaper and safer with each iteration. However, with FSD increasing its price again, I believe it just priced many people out of buying the software.

This post isn’t a question of whether FSD is worth the purchase at its price point. For what it can do, its value is more than the current price. What I’m talking about human tendencies towards software.

Most people don’t understand the value of software. Just look at any app store; free & freemium reigns supreme. Not only that, people tend not to want to buy software if there’s not a free trial for them to try it out themselves, especially if there’s no refund.

Even as great as FSD beta is, not everyone wants an AI to drive. There are people that still want to drive their car. Either because they like to be in control or they don’t trust an AI driving them. Asking someone to pay $10k for something that many people might perceive as a novelty is a tough pill to swallow.

There’s also a final piece that might stop folks from buying this software; they can’t take it with them. It’s on the car forever. There are cons to this. As you remember, a couple of months ago, I was in a significant accident. My car was borderline of being totaled. When they gave the car’s value, it was clear that they didn’t add FSD into it. I paid $8k ($5k for Autopilot & $3k for Full Self Driving). The difference between the payout and being a new car and having no loan was why I wanted my car fixed rather than getting a new car.

There have also been reports with my people I know that FSD wasn’t valued during trade-ins. Unless they get an appreciated value that offsets the FSD cost, there’s no way anyone would take the hit to upgrade the car, especially when Tesla will turn around and sell it with FSD baked into the cost.

So what can change in the current process? Well, I think there are several options. Leaving FSD on the car isn’t a bad option, especially if you A) don’t see value in it anymore or B) you doing a third party sale or transfer and want the third party to have FSD. For example, so that I want to transfer my car to my parents, I would rather have them keep FSD than to buy it all over again. The current model would support this.

The second option is to have FSD transfer to another VIN. Think about existing software where you are limited to computers. You own the license. You can assign the license to specific computers. If we take this example in the same lens, I could have unassigned my FSD from my VIN. Having the license unassigned would have made me more comfortable pushing for my car to be totaled and taking FSD with me. Then when I was ready, I could have reassigned FSD to a new car.

This also brings up an interesting use case of an unassigned license. Does Tesla want to sell FSD without a car at this moment? Probably not. But I could theoretically decide to buy a licensed at the current price, say $10k, and then apply it to my future car purchase. Tesla would probably have to limit one or two since they probably don’t want commercial owners to buy 100s of unassigned licenses for a future Robotaxi fleet. Tesla would lose money in that case. But there are cases where people actually want FSD, but their configuration isn’t available yet. E.g., Model Y long-range with rear-wheel drive & Model Y seven-seat interior.

What if you don’t want to buy the software outright? Well, if you look at FSD, it’s a service. All the cars built today have everything needed for FSD, even if you opt-out of it. Tesla could sell FSD as a Software as a Service (SaaS). This would help people justify the cost and have them opt-in to the service when they are comfortable. Keep in mind, FSD is still considered beta.

As FSD prices go up, many people can’t justify the cost. Elon confirmed last week that FSD rentals would come next year. But the question is, how much will that be? My guess, it won’t be cheap. If you get FSD right now at $10k on a 5-year loan, you are looking at $166.67 per month. Tesla also offers a 3-year loan to a 7-year loan. So that gives us a range of $119.04 – $277.78. For this to make sense, Tesla would need to make sure that the cost per month is more than the average loan. You should get a discount for buying it outright. My guess is that it would be priced at $200-$250 a month. It needs to be priced to take a person about 3 years to recoup your cost, but enough to switch out with a minimal loss.

The rental also brings up an interesting use case. Now folks could potentially choose when they want FSD. With the ongoing pandemic, a lot of folks are barely driving. If the pricing is close to $250, I can see individuals pausing their subscription. Or enabling when they know they have a long trip. They could potentially pause their subscription if they leave for an extended vacation.

As I don’t think it’s cheap, it’s not going to be something that people will forget to turn off. One downside of the FSD rental is that you are at risk for a price hike at any point. Just like your cable or internet pricing, Tesla can raise FSD pricing. So if they increase the price of FSD from $10k, the FSD rental will increase as not to incur a loss.

As for me, I’ve been a long believer in FSD. I understood the vision when I bought it with the purchase of my car. My future Cybertruck reservation has FSD included to lock in the price. And whatever my next Tesla would be, I would probably buy FSD shortly afterward as per my previous post, assuming it’s not extremely expensive when I get to that point. I still want my credit card points!

If you are in the market for a new Tesla Model S, 3, X or Y and want 1000 free Supercharger miles, please consider using my referral code: https://ts.la/sunil91588 when you make your order online! Or give the code sunil91588 to a Tesla sales representative to get it applied to your order!

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