Is it unethical to charge extra for Autopilot (software) after we had paid for the hardware?

[MP3Mike]

I want to support Tesla but until there is evidence we’re not paying twice for the current EAP that’s already installed in every Model 3 (not talking about what’s in the works), I’m gonna sit this one out.

My guess is that we will never have proof either way. You sitting out is just fine, but don't expect Tesla to just give you EAP for free.

But one thing to note is that they set the price on EAP before it was even working, and it took way longer to get working than they thought it would. So I personally don't think the EAP software costs are included in the vehicle price. (Sure they hardware cost are, but most of that hardware is in use for everyone.)

 

[Vaxe]

Thanks for the constructive response, this is what I had hoped to read.

I agree with your points, but I am unconvinced Tesla chose not to already include the software development cost of EAP into the sticker price. We know they are struggling, and they know we are eager to buy. They raised the price from $35k to $49k and it’s still the number one selling car in its class. Why would they make recouping the software cost of EAP an option?

You are mixing up updates and upgrades.

Updates are generally free and are the consequence of silent, automatic contract between you and the company. You accept current version of the product with all it's limitations and bugs with the hope that the company will fix it by issuing required updates. Which hopefully will fix all bugs somewhere in the future. They are free generally not because these companies are stupid and find their purpose by providing free servicing but because they issue unfixed "live" products.

Upgrades, are additions of significant new features and functions not existing previously in your system.
Apple provides software upgrades for free for 5-7y old hardware only and it is the result of their support policies. Similar restrictions exist in many other companies.
You paid only for hardware part which is used also for other features.
May be it's news for you, but it is quite possible that the photo-camera you buy, TV you use, special hardware you buy for your company shares same hardware with cheaper or more expensive models and the only difference lies in few bits of software and trivial hardware patches. Quirks of mass production.

The only real alternative to current Tesla's approach is subscription, and I am not sure you want this approach. In professional software the transition to subscriptions which happened few years ago raised software expenses by 20+% yearly. With corresponding drop in software advances and generally crappier quality of "new" variants which often you can not skip even.

 

[SSedan]

You know it strikes me the argument that the pric of EAP being built into the price is completely invalid on its face based solely on the fact it is an add-on option.

Pricing in Capitalist economies is about what the market will pay.

If you want to argue the car is profitable without charging more for EAP that is something else. If you think it is evil for a company to profit go find a nice true communist society to join, well you will have to start one since I am unaware of any. The existing communist states exist for an elite few to prosper.

 

[SMAlset]

Gosh I sure would rather have all the hardware in my car without having it taken apart should I decide to add EAP at a later date. Sometimes people buying really are limited in funds and need to keep their payments or purchase price to a certain comfort level for them. The path to getting EAP later is then super simple, easy for the owner. Otherwise I doubt people would want to go through having their car disassembled to add stuff. It's like adding structured wiring into a new home. Way more cost efficient and less labor involved than to do a remodel to add just it later. With the service centers busy already, why would Tesla create a more time-swallowing feature for them to have to contend with on top of what they already do. No, smartest thing is to add the wiring and devices while it's being built and at volume pricing for all the parts has to be much, much less expensive for Tesla as well.

And BTW as far as I know Tesla didn't raise the price from $35K to $49K @Vaxe . Those are two separate versions of the car. The fact that the ramp up took longer and the $35K had to be postponed in delivery isn't the same thing. At least not at this point. And I believe the $35K version will be delivered down the line. Lots of ways once they've reached high production to alter features and body and interior parts to reduce the production cost of the vehicle to reach that level.

As @SSedan said, it's an option. You don't have to have it and pay for it if you don't want to. But if you sell or trade-in your non-EAP vehicle sure is nice the next person can add it and if they want FSD at some point when it's approved and launched, it will be easy for them to then add that too (since you'll need EAP to use FSD). Who wants to buy a low kW battery used car knowing you can't upgrade but may want to in the future. With the way Tesla is doing the EAP and FSD options, not a problem. The flexibility of how Tesla designed things in general make it a very desirable car.

 

[⚡️ELECTROMAN⚡️]

Should those people have gotten the 75kWh battery for free?

Yes of course. It was very unethical of them to charge $9,000 less for having a software locked battery, and then to not unlock it for free.

 

[Vaxe]

Hence why I started this thread.

1) It makes all the sense to include the cost of EAP into the sticker price of every Model 3, since they are hurting for profit, and we will still buy the car, as shown when it went from 35k to 49k. Even at 55k with EAP as a standard option, it would still sell. So who’s to say the 49k doesn’t include the cost of EAP already.
We will never know.

2) The issue I have (no proof) is paying for EAP hardware and software upfront in my 49k base price, only to have the software portion locked, unless I give Tesla $6k to fund future projects. This feels like greed.

You know it strikes me the argument that the pric of EAP being built into the price is completely invalid on its face based solely on the fact it is an add-on option.

Pricing in Capitalist economies is about what the market will pay.

If you want to argue the car is profitable without charging more for EAP that is something else. If you think it is evil for a company to profit go find a nice true communist society to join, well you will have to start one since I am unaware of any. The existing communist states exist for an elite few to prosper.

 

[ulrichw]

IMO, this thread is based on a very naive interpretation of how product pricing works.

Vaxe, you seem to feel like the way that pricing must work (at least from a moral perspective) is that a producer totals up all of the costs that went into the car, adds a reasonable profit margin (I assume you'll allow that, right?) and then sets the price.

If the producer manages to eliminate a piece on the car, or they're able to reduce the cost of a component, it sounds like you would feel they're morally obligated to reduce the price.

That's not really how pricing works. Sure, cost is a factor (in particular if cost exceeds the price), but the reality of it is that a producer will generally try to set prices that maximize profit. If they feel an option has a large perceived value relative to cost, they'll happily set the price higher.

There's no morality involved here - the producer will get punished for pricing mistakes by having buyers reject their products.

In this particular case, I believe that they're willing to take a hit on the profit margin of cars whose buyers opt out of EAP and FSD because they believe they'll be able to convert a large enough percentage on an upsell down the road. It sounds like you'll not be one of the upsells - but as long as they get a large enough percentage of people, they'll still come out ahead on the decision to include the hardware on all cars.

BTW: This is a fascinating business model change for the automotive industry. In the traditional model the manufacturer profits primarily from the initial sale. In this case the manufacturer can make a significant money on after-purchase software upgrades.

 

[dondy]

Thanks for the constructive response, this is what I had hoped to read.

I agree with your points, but I am unconvinced Tesla chose not to already include the software development cost of EAP into the sticker price. We know they are struggling, and they know we are eager to buy. They raised the price from $35k to $49k and it’s still the number one selling car in its class. Why would they make recouping the software cost of EAP an option?

"Beans counting".
Many many aspects of what you see (discounts in supermarkets is the easiest example) are consequences of financial "balancing". Companies can and often sell you items on discounts below prime cost because of "money flow" and "account balancing". From my completely clueless and far away nest I can only guess that Tesla has chosen rather normal "spreading" approach. Taking part of the feature costs from everybody and the rest from those who choose it.

It is a sensitive feature which requires significant safety efforts and installation on demand would be much more costlier than in the factory.

 

[Vaxe]

Good post, but I don’t trust Musk enough to assume that $14k delta is solely for materials. What better opportunity than launch to cloak other development costs into the initial sticker price.

The cost to develop EAP is hundreds of millions. Wouldn’t it be nice if 100% of Model 3 sold absorbed their fair share? This is why I think we all already paid for EAP, it’s just locked unless we pay that additional $6k upfront to support cost of improvement.

Gosh I sure would rather have all the hardware in my car without having it taken apart should I decide to add EAP at a later date. Sometimes people buying really are limited in funds and need to keep their payments or purchase price to a certain comfort level for them. The path to getting EAP later is then super simple, easy for the owner. Otherwise I doubt people would want to go through having their car disassembled to add stuff. It's like adding structured wiring into a new home. Way more cost efficient and less labor involved than to do a remodel to add just it later. With the service centers busy already, why would Tesla create a more time-swallowing feature for them to have to contend with on top of what they already do. No, smartest thing is to add the wiring and devices while it's being built and at volume pricing for all the parts has to be much, much less expensive for Tesla as well.

And BTW as far as I know Tesla didn't raise the price from $35K to $49K @Vaxe . Those are two separate versions of the car. The fact that the ramp up took longer and the $35K had to be postponed in delivery isn't the same thing. At least not at this point. And I believe the $35K version will be delivered down the line. Lots of ways once they've reached high production to alter features and body and interior parts to reduce the production cost of the vehicle to reach that level.

As @SSedan said, it's an option. You don't have to have it and pay for it if you don't want to. But if you sell or trade-in your non-EAP vehicle sure is nice the next person can add it and if they want FSD at some point when it's approved and launched, it will be easy for them to then add that too (since you'll need EAP to use FSD).

 

[SMAlset]

I support Tesla’s vision and have always recommended them to friends and coworkers. With the latest firmware, I was able to try Autopilot for the first time and would like to buy it - but I’m having a hard time justifying the purchase.

If I had to bring the car in for service to have them install additional sensors or cameras, then I’m all for shelling out the $6000.
However, with a 30min software download, I now have Autopilot, which means I had already paid for the hardware. It’s like buying an iPhone with camera enabled, but live video recording disabled unless you download a paid app.

I think Tesla should’ve offered an option with less Autopilot hardware for less than the $49k base. Or they should’ve raised the base price and made Autopilot standard. It leaves a bad taste to take away a feature when the car you bought already has the hardware. If it’s a monthly subscription fee for a modest $25-$50 for server maintenance, improvements and updates, then yes. $6000 is just too much.

I’m sure Tesla already factored in the cost of BOM and included that in our invoice. $6000 goes straight to the bottom line.

Curious to hear your thoughts. Thanks all

Hey you know if you could write your own software to get the same functionality, that would be a bargain then if you didn't have to pay for the software to run the cameras and connect to the MCU etc. Sorry found the reasoning funny.

 

[SMAlset]

Good post, but I don’t trust Musk enough to assume that $14k delta is solely for materials. What better opportunity than launch to cloak other development costs into the initial sticker price.

The cost to develop EAP is hundreds of millions. Wouldn’t it be nice if 100% of Model 3 sold absorbed their fair share? This is why I think we all already paid for EAP, it’s just locked unless we pay that additional $6k upfront to support cost of improvement.

Well just don't buy it then if you don't trust him or Tesla. Buy some other car which offers something close to it that you don't feel rippped off I guess. Do you short the stock btw? Tesla's making the cars and can price the options as they see fit. Maybe they will make a special car for you without cameras and wiring and you can then wait with your car in the service center for an appointment weeks out while they order all the parts for you to upgrade, install, load the software and test. Yeah, not happening.

 

[Vaxe]

Thanks for the constructive post. I agree with your points but have a hard time believing Tesla would take a hit on profit and rely on future upselling to recoup their EAP investment - when they could’ve amortized that cost into the initial sticker price and still have a huge demand for the vehicle.

The morality is locking features the consumer already paid for (development cost of the current EAP iteration), and making it necessary to pay an unrelated cost to use said features. That $6k unlock feels like a guise as funding for other projects within Tesla.

IMO, this thread is based on a very naive interpretation of how product pricing works.

Vaxe, you seem to feel like the way that pricing must work (at least from a moral perspective) is that a producer totals up all of the costs that went into the car, adds a reasonable profit margin (I assume you'll allow that, right?) and then sets the price.

If the producer manages to eliminate a piece on the car, or they're able to reduce the cost of a component, it sounds like you would feel they're morally obligated to reduce the price.

That's not really how pricing works. Sure, cost is a factor (in particular if cost exceeds the price), but the reality of it is that a producer will generally try to set prices that maximize profit. If they feel an option has a large perceived value relative to cost, they'll happily set the price higher.

There's no morality involved here - the producer will get punished for pricing mistakes by having buyers reject their products.

In this particular case, I believe that they're willing to take a hit on the profit margin of cars whose buyers opt out of EAP and FSD because they believe they'll be able to convert a large enough percentage on an upsell down the road. It sounds like you'll not be one of the upsells - but as long as they get a large enough percentage of people, they'll still come out ahead on the decision to include the hardware on all cars.

BTW: This is a fascinating business model change for the automotive industry. In the traditional model the manufacturer profits primarily from the initial sale. In this case the manufacturer can make a significant money on after-purchase software upgrades.

 

[Maximilien]

One interesting scenario can arise that if (Big IF) large portion of Model 3 owners skip EAP, then Tesla may reduce EAP price.

It had happened with Model S software locked 60. Initially it was 9K+tax and after a while, it went down to 7K+tax. Hardly anyone bought it. Tesla even pushed the ad to sell Battery upgrade and some people were pissed because no one likes ads on the center display.

Tesla being desperate, suddenly introduced the battery upgrade for 2K+tax for additional 40 miles. So many people, including myself, plunged into it as the price deemed fair.

Model 3 EAP can take the same path if many people (possibly 80% or higher) opt not to pay for it. Tesla doesn't seem to really care for the old customers who had paid huge sum.

But...

I don't see that happening with the current EAP. Because I see so many people buying EAP, which is the hallmark feature of owning Tesla.
If everyone work together by boycotting not to have EAP with well orchestration, then we may see it happening. But don't do it! I want Tesla to be prosperous and make some profit.

 

[SSedan]

ulrichw hit the nail on the head with your naive understanding of pricing.

A lot of folks go with EVs for short commutes where EAP is useless so wouldn't it be wrong to charge them for it if they don't want it. My commute is under 15miles round trip rural into the edge of town, deer being a major concern. EAP would be near useless to me.

 

[Vaxe]

And you believe Tesla didn’t include the software cost of EAP into your sticker price? You know you already paid for all the hardware.

ulrichw hit the nail on the head with your naive understanding of pricing.

A lot of folks go with EVs for short commutes where EAP is useless so wouldn't it be wrong to charge them for it if they don't want it. My commute is under 15miles round trip rural into the edge of town, deer being a major concern. EAP would be near useless to me.

 

[JeffK]

I'm not sure why this thread has gone on for six pages debating whether or not selling software features is ethical or not.

My macbook doesn't come with Final Cut Pro even though I paid Apple for the hardware.... at this point the development was already paid for so why doesn't it cost just a few cents to transfer me the bits? (rhetorical)

You pay for the hardware and the hardware allows safety features such as AEB which all cars get. EAP and FSD are huge profit drivers. Development on these systems does cost money, have you seen the salaries of machine learning experts?

 

[rluciano]

Like I said, happy to pay for AP 3 and any associated hardware.

Not willing to pay for the current EAP unlock since I already did pay for its V2 hardware and software in my $49k base price. Anyone who thinks Tesla put these in the vehicle for free needs to come off the fanboy wagon.

They are a business and 100% did their best to calculate EAP spend and put that into the base price already. Why pay $6k for something they already charged you for, and will again to “upgrade” to V3 and full self driving.

To answer your analogy, I never paid for annual GPS updates because the one that came with the vehicle has always been accessible by default, and was never software locked. However, I would be willing to pay Tesla annual software updates for continuous improvement on EAP. Just think it’s unethical to charge $6k when I’m sure they already put that into the base price to recoup development cost across the fleet.

You THINK you paid for the software. Tesla says you did not. They sell the product. They set the price. They advertise the price. You knew all of this upfront. Make your decision and live with it. Tesla is trying to make a profit. You can argue that EAP is overpriced. Maybe it is. Then don’t buy it. Tesla set the price for the hardware and software separately. You don’t like their pricing, tough luck.

 

[Vaxe]

TLDR
My view is that Tesla already included all EAP costs (under the current iteration) in the $49k Model 3 sticker price. The $6k is funding to sustain continuous improvement. If this is the case, I would rather be able to access EAP now with no additional unlock fee, but pay for future upgrades in intervals (and at my discretion) instead of one lump sum to even access what I already paid for. Funny thing is once the tech evolves, they will likely charge us again - so how far does the $6k truly go?

———————————————
If we had already been charged for software and hardware of EAP in its current release, as part of the sticker price, is it fair to charge us another $6k to unlock it. My bad on wording - should have used “greed” instead of “ethics”.

Tesla is struggling for profit and it seems sound to amortize all costs, including past and present software R&D into every vehicle sold, rather than rely on consumer adoption. Why give people the choice when you can guarantee a return? Masking that price in introductory release (from 35k to 49k) would be discrete.

To me, the $_ dollars of software they no doubt amortized into every Model 3 + $6k to unlock is not worth it as I have a short commute. It’s a great feature so YMMV, but I will pass.

That’s it from me folks, hope you all have a great long weekend. Thanks all to those with contributing comments.

I'm not sure why this thread has gone on for six pages debating whether or not selling software features is ethical or not.

My macbook doesn't come with Final Cut Pro even though I paid Apple for the hardware.... at this point the development was already paid for so why doesn't it cost just a few cents to transfer me the bits? (rhetorical)

You pay for the hardware and the hardware allows safety features such as AEB which all cars get. EAP and FSD are huge profit drivers. Development on these systems does cost money, have you seen the salaries of machine learning experts?

 

[JeffK]

The question is has Tesla already included the software development cost of EAP (in its current release, not accounting for future upgrades) into the $49k sticker price, and is that $6k unlock justifiable if so. Or is it just extra padding for the bottom line to fund other projects.

Of course not, development is ongoing and will continue forever. You cannot simply discount future upgrades, that money has to come from somewhere to pay for ongoing development.

Also, the margins right now are likely still negative on Model 3. We'll have to see if they turn a profit at the end of Q3.

 

[brkaus]

I have to pay for commercial software depending on the number of CPUs in the computer.

That’s the exact same software. It’s just a business model. Plain and simple.

My software company could have raised the price on the base and not up charged for more for running it in a larger computer.

They have a return on investment they need and there are multiple ways to get there.

Maybe they adjust over time. Like my software, they are trying to maximize ROI. Maybe they get the same return if the increase the base on everyone by $3k.

BMW initially sold the traffic aware cruise for $3k more. The radar was already on it either way for safety features.