Think of it this way, what pressure does Tesla have to put HW4 in any of their cars today? None, absolutely ZERO.
Just saw this article on the forum today. It pretty much states in much better language than I did, what I tried to say in my past posts here. Tesla may not be able to put HW4 in older cars, but there will be a great incentive for them to do SOMETHING.
Tesla, Inc. recently issued a recall on its full self-driving software package. Click for my take on TSLA's potential liability for FSD and my view of the stock.
seekingalpha.com
For those that have followed the Tesla story, you know that CEO Elon Musk has basically talked about full self-driving
for almost a decade now. The company still has not shown off the U.S. coast-to-coast autonomous drive that it said would come by the end of 2017, for instance. As a reminder, Tesla started building vehicles with full self-driving hardware
back in October 2016. As a point of reference, the chart below shows Tesla's cumulative production since the start of 2017, excluding maybe 15,000 vehicles or so produced in Q4 2016, that would have had FSD hardware equipped.
Cumulative FSD Production Vehicles (Company Filings)
Over the years, there have been multiple updates to the full self-driving hardware. Each time, there have been questions over whether or not customers would be able to upgrade their hardware. If so, would those who paid for the FSD software get the new hardware for free? I bring this up because there are those who believe Tesla will not be able to get to true full self-driving (or possible robo-taxis) with some of the earlier versions of this hardware.
The next version of FSD hardware is 4, which could go into vehicles any day now. Perhaps Tesla will unveil it at the upcoming March 1st investor day. Elon Musk said that a
retrofit for current vehicles is highly unlikely for those who have hardware version 3, yet he still believes version 3 will still be good enough to be safer than the average human. For those wondering about a potential retrofit,
this Twitter thread shows pictures of these two hardware versions. It seems quite obvious that you won't be able to swap one for the other, and it was pointed out in the thread that the new hardware will probably use even more cameras in its setup.
The potential liability question comes into play here if you think Tesla won't be able to truly solve FSD with the current hardware. One might think that a potential lawsuit would just want to refund the FSD price, and those arguing here might cite the recall number of vehicles to get a total liability. At an average cost of $10,000 for FSD, that gets you to around $4 billion when you consider how many customers have
reportedly paid for the package so far.
However, like almost everything else in this world, things here probably aren't that simple. A customer could suggest that they bought their Tesla because of FSD's potential, but are waiting to buy the FSD package until it's completely ready for prime time. By the end of Q1, there could be close to 4 million vehicles that have hardware version 3 or earlier. A lawsuit looking for Tesla to repay the consumer for the entire vehicle's cost based on not delivering FSD, using an average sales price of $60,000, would result in a liability of $240 billion dollars! That number is about 11 times the cash Tesla has on hand currently, and it represents about 3/8 of the company's market cap.
Unfortunately, we're only starting to scratch the surface of how bad things could be if we look at a truly worst-case scenario. That's because back in early 2019, Tesla held an Autonomy Day, which is where Elon Musk famously talked about
having a million robo-taxis on the road by the end of 2020. We are more than two years past the end of that calendar year, and there still is not a single Tesla robo-taxi on the road currently (ride-sharing operators using Tesla FSD Beta do not count). That gets us to one of the slides Tesla management showed at that presentation, seen below.
Tesla Robo-Taxi Slide (April 2019 Company Presentation)
Tesla ended up raising more than $10 billion in capital, some may say to avoid bankruptcy, between that presentation and the end of 2020. There could be a bit of a liability, and potentially even criminal charges against management there, if one is claiming securities fraud. However, that's a debate for another day. What I'm focusing on here is what consumers would be arguing, based on the premise that their Tesla with full self-driving could become a robo-taxi.
The above slide suggests that a Tesla robo-taxi would generate $330,000 in gross profits over the lifetime of the vehicle. For this argument, let's assume that vehicles with hardware version 3 or earlier cannot get to a point where they are robo-taxis. I say this because one Twitter user, who has been a major supporter of Tesla and Elon Musk over the years, stated
in a tweet that this version will never be able to drive around without human input. This particular Twitter user is one of the most prominent FSD Beta testers out there. He's not alone, however, as highly followed Twitter user Troy Teslike apparently
agrees with this sentiment that driverless FSD hardware 3 looks unlikely, with Tesla likely to try to get there with version 4 for the foreseeable future.
If you had a class action suit covering those roughly 4 million vehicles, and they were all arguing they lost out on, say, $260,000 in robo-taxi profits (the $330,000 minus an average $60,000 vehicle cost and the average $10,000 FSD cost), we'd be talking about a little over $1 trillion. There has been at least one lawsuit so far regarding Autopilot and FSD, although it is very early on
in the legal process at this point.
I'm sure skeptics will ask about leased vehicles and those that may have been totaled since. Well, vehicle leasing has only accounted for a mid-single digit percentage of Tesla's deliveries over time. Some of those vehicles could be bought at the end of the lease, or turned over to a second consumer, which could provide a second layer of liability in some cases. Also, for my assumptions today, I'm basically saying that vehicles with hardware 3 are no longer produced after Q1. If that's not the case, the number could continue to rise, offsetting some of these variables. Still, even if you want to take, say, 5% off my worst-case scenario, you're still talking about nearly a trillion dollars.
