Let's Not Make Paying for Software Features a Precedent As Tesla Sets the Standard for the Future

[thefuturenow]

Let me start with a wholehearted congratulations to Tesla, Elon, and the team. The Model 3 is undoubtedly the Model T of this generation, and will set the precedent for what automobiles can and should be for not just the upcoming decade but well into the next century. I can appreciate just how full-featured even the base model is, as it it certainly looks like it incorporates the best of what Tesla is capable of into its value-propositioned design which is no small feat. From this lack of corner-cutting, it is blatant that Tesla understands the importance of starting with a wholly-functional base then adding features that are entirely optional for having a great experience.

As Tesla is setting a new precedent, I believe it is critical that vehicles are not unnecessarily restricted or limited by putting software behind a paywall. The computer and technology industry as a whole, which I believe Tesla aligns with even more so than the automobile industry at this point in time, has been moving away from the model of paying for software or an operating system that has additional features in favor of a singular, unified base with free updates. Apple has it right with their devices by including all software features on every capable iPhone or Mac model, and releasing even major updates for free after users have already paid for the hardware -- and many technology companies have followed suit; charge solely for the hardware, not software. Tesla should not revive this backwards-thinking trend in cars that are frankly (beautiful, well-made) pieces of forward-moving technology.

While I can applaud Tesla for including Autopilot safety features on every Model 3, if the full Autopilot hardware is in place it seems nonsensical to stop there. As the rest of the Autopilot features are pieces of software that do not require additional hardware, they were already developed and will have to be continually refined regardless of whether two owners pay to have the ability to use them or if 200,000 owners do. That is the key distinction between software and hardware upgrades: there is zero additional cost to provide the software to all users rather than the select few that purchase it. In fact, it can only make the software better for all as it affords Tesla the ability to further refine Autopilot through real-world testing across every single road and route possible.

Model S owners knew that they were funding the development of Tesla and could expect to fund software development which is why charging for software features that didn't come with the car could be expected, whereas the Model 3 is Tesla's first mass-market product. This is where Tesla has to prove how it will present itself to the consumer market. I believe that if Tesla does not charge for software features that could easily be on all cars, then it will entice more consumers to purchase the Model 3 (which I know is not a problem Tesla has right now) and make more meaningful hardware upgrades at the time of customization more enticing.
I understand software development is not cheap and that building the price of costly software into the car comes with scale, so perhaps the unprecedented demand for the Model 3 is already persuading Tesla to include all Autopilot features on every Model 3 (and any other features that are purely software-based that the company may have been considering putting behind a paywall) since the company will sell enough vehicles to incorporate the price of software development into the cost of the vehicle itself.

As Tesla is responsible for the paradigm shift of the automotive industry with the Model 3 more so than ever before, let's not make unnecessarily restraining vehicles by charging for software features part of the precedent.

Regards,
An exceedingly electrified future Model 3 owner/reservation holder


I also hold a stock position in TSLA, yet I still believe that not charging for software features is in the company's best interest -- there are better ways to generate profit and fund software development than by holding back vehicles and resorting to an archaic model in the technology industry. I would rather everyone experience all that Tesla is capable of at no additional cost to the company (per car sold) than only a select few that justify or rationalize paying for software features; let's not unnecessarily limit what is sure to be the best vehicle ever made from a company that will be around for a very long time if they get the Model 3 right.

 

[Qball]

I agree 100%. The more Tesla's are on the road WITH full Autopilot software included, the more Tesla stands to gain as the clear leader in, not only electric vehicles, but also vehicle automation (i.e. self-driving cars). It would be petty and short-sighted for Tesla to try to earn a few bucks by charging for full Autopilot.

But unfortunately, I fear that the precedent has been set with Autopilot as "optional" on the Model S....

 

[musicious]

I disagree, the autopilot hardware costs money that they LOSE when buyers dont pay extra to unlock the software; i believe it was stated about the model S that for streamlined production they installed the camera, radar and 12 sensors on every car but lost $ for every car sold that did not pay for the option.

In addition the cost of the entire team of people devoted to autopilot needs to be funded and without extra income from those that upgrade everyone will suffer with lackluster functionality. It still helps resale value signicantly that the buyer benefits from even if they dont pay for autopilot software because when they sell the car later the next owner can pay to enable it.

Also, since no other manufacturer has anything close to the functionality of autopilot and there is huge demand for Tesla, they'd be fools not to cash in on their biggest advantage besides supercharging (which also should cost extra).

 

[thefuturenow]

By the way, I apologize for typos as I did not realize this forum does not have an edit option.

 

[DrPhoton]

I disagree, the autopilot hardware costs money that they LOSE when buyers dont pay extra to unlock the software; i believe it was stated about the model S that for streamlined production they installed the camera, radar and 12 sensors on every car but lost $ for every car sold that did not pay for the option.

In addition the cost of the entire team of people devoted to autopilot needs to be funded and without extra income from those that upgrade everyone will suffer with lackluster functionality. It still helps resale value signicantly that the buyer benefits from even if they dont pay for autopilot software because when they sell the car later the next owner can pay to enable it.

Also, since no other manufacturer has anything close to the functionality of autopilot and there is huge demand for Tesla, they'd be fools not to cash in on their biggest advantage besides supercharging (which also should cost extra).

I agree. Also, by installing the hardware and charging for the software, they're making it possible for people who can't afford the AP feature initially to add it later. This would be very difficult to do if the hardware was not already installed because the cost of installing the hardware after the car is assembled would be much greater than the cost of doing it during production of the vehicle.

 

[graphix25]

Software as a service or one time upfront "Shrink Wrap" capital purchase are the predominate ways software is sold in the Enterprise market. Software as a service is definitely the method going forward most software will be sold. Traditional Enterprise players have all made or in the process of making this transition today to a SAS model (Microsft, Oracle, SAP). A few companies were born in the modern software era and never did packaged software (Salesforce, Servicenow and Workday). In the consumer space what has allowed "free" software is a new business model driven by advertisement sales predominantly or the "app" revenue. I don't see how this work on car however. Who is going to pay the bill for free software on the Tesla. Not sure I want advertisements and commercials showing up on my display.

Let people who value those features pay for them either up front or in a monthly service plan is the right model for a car or any other high value software platform. Tesla is playing it right from my perspective. Provide base functionality and let people uplift their functionality where they see value. In the end someone has to pay for the software development. Personally I would be interested in a SAS model for the Tesla cars, pay a monthly fee to enable features rather then the upfront capital cost.

 

[Spidy]

Options on cars, especially premium ones, often have little to do with actual cost. It's a lot more about what you can get away with charging for a feature and how desirable certain features are.

At the end of the day you have spend R&D on every feature of the car. Many of these are just a few dollars in actual production costs or at least significantly less but a manufacturer will charge you with hundreds of Dollars or more. At the end of the day that's simply how they are able to advertise a car with a base price around $3x when in reality it's actually a $40k+ car.

Tesla want Autopilot hardware in every car for the safety (rating), but they also know Autopilot is a very desirable feature and a majority of people is willing to pay $1000-2000 for it.

 

[David_Cary]

Name a car that has TACC standard?
Now name one that has autosteer standard?

Remember, the biggest issue with the Model 3 is making a profit at $35k. Lots of people have speculated that $35k will be a non profit sale. The only way to make money is with options and ones that involve flipping a switch are the best kinds.

At $35k with $2k for autopilot, they are probably sold out until 2020. And you want them to give that $2k away for free - why so they can be sold out until 2021? Cash is king especially for Tesla.

 

[Bimbels]

Tesla is still not profitable because they sink every penny back into R&D, and factories and gigafactory. All in preparation for the model 3. While S/X owners certainly helped pay for that, they also got billions from outside investors. So I would say that R&D is certainly not paid for yet.

There may be a day when the software is considered "paid for" but we are nowhere near that time yet. We may never be since R&D is continual. Maybe the price will go down for the option, or it will be absorbed into the price of the car so you won't feel like you're paying for it. But on a 35K car - we certainly should pay for it.

The hardware will be in every car. If you pay for it, you will be rewarded not only with the feature, but a constantly evolving one that at this point makes you feel like you got a new car after each update as new features are added.

So, I disagree with the premise that full AP features should be "free." One could also argue ludicrous should also be free since that's just a software "switch" in the model 3. But as a fellow shareholder, I believe these features are ways to recover costs AND make profit. They absolutely should not be free.

 

[Snowdog]

So who do you hate? Tesla or Buyers?

Here are the two alternative to not having an expensive option for autopilot.

1: Tesla gives it away, and loses $2000/car potential revenue. It could be the straw that breaks the company.
2: Tesla includes, but raise the car price. Every single car has to go up by $2000, even for buyers who don't want it.

Let options, be options. They have always been profit centers, but they allow a lower entry price vehicle.

 

[eliassorensen]

Why not? You also pay for extra software for your computer. Why not your car? It cost Tesla money to research and develop these things. I don't see why they should not make it as an add-on.

In the enterprise networking business, you can also buy huge firewalls etc. that are software limited. If you need more stuff, you just call the manufacturer, get a new key, and the stuff is activated.

 

[Jersey Shore Tom]

Apple has it right with their devices by including all software features on every capable iPhone or Mac model, and releasing even major updates for free after users have already paid for the hardware -- and many technology companies have followed suit; charge solely for the hardware, not software. Tesla should not revive this backwards-thinking trend in cars that are frankly (beautiful, well-made) pieces of forward-moving technology..

Last time I checked Apple has an app store with over 1,000,000 apps in it, many of which require a payment. They sell plenty of software for Macs separately from the hardware. To be fair to Apple, which greatly pains me by the way, many other tech companies have similar business models. I don't find it objectionable in the least.

 

[diamond.g]

Software as a service or one time upfront "Shrink Wrap" capital purchase are the predominate ways software is sold in the Enterprise market. Software as a service is definitely the method going forward most software will be sold. Traditional Enterprise players have all made or in the process of making this transition today to a SAS model (Microsft, Oracle, SAP). A few companies were born in the modern software era and never did packaged software (Salesforce, Servicenow and Workday). In the consumer space what has allowed "free" software is a new business model driven by advertisement sales predominantly or the "app" revenue. I don't see how this work on car however. Who is going to pay the bill for free software on the Tesla. Not sure I want advertisements and commercials showing up on my display.

Let people who value those features pay for them either up front or in a monthly service plan is the right model for a car or any other high value software platform. Tesla is playing it right from my perspective. Provide base functionality and let people uplift their functionality where they see value. In the end someone has to pay for the software development. Personally I would be interested in a SAS model for the Tesla cars, pay a monthly fee to enable features rather then the upfront capital cost.

I agree with your post with the exception of the pay monthly for features part.

 

[djplong]

Caveat: I've designed and written software since the 1970s.

While I understand the OPs concerns, it wouldn't surprise me AT ALL to see Tesla follow a software production cycle. In short, it won't become "free" but it WILL get cheaper.

Products like Microsoft Office or video editing software used to costs over $500. Over the years, that price has come down to under $100. In some cases, they even provide perpetual updates in exchange for an annual fee.

This will probably happen with stuff like Autopilot, Now it costs $2500. It might be cheaper on the Model 3. Years from now, it could be as low as $500. It all depends on how much the accountants say they've recouped in development costs versus projections for future sales. The pitch goes "Ok, we got all we could from pricing it at $1500, and we've made $X profit - if we lower it to $999, we're looking at $Y additional profit but no additional development costs" (assuming it's in a 'normal' sustainment cycle).

 

[Chrisizzle]

The premise of the original post is false and I wonder what software @thefuturenow is using.

Many apps now are cheap/free and you pay for functionality. From simply removing annoying ads to additional app features.

Even worse, major software manufacturers are going to a subscription model. As a photographer, I used to be able to buy Adobe Photoshop outright and use it until I died. Now, Adobe lets me install everything (Photoshop, InDesign, After Effects, etc...) and I pay monthly for the software I use. The same is true with Microsoft Office.

So, the trend and absolute WORST case scenario is Tesla following suit and requiring a subscription to use autopilot.

In regards to software activation of hardware: That is also common and I believe, positive. For example, Sony makes an HD camera at an HD price but is 4K capable. You have to buy a serial number to unlock 4K features. I would love that option on a car. Imagine the customization on the used market.

Also, consider 'hardware' has always been artificially segmented. As a quick example, many cars and all trucks have 90% of the wiring for towing trailers. However, the manufacture sells you the 'wiring harness' to plug from their proprietary outlet and a standard trailer plug. I assure you two feet of wire did not cost what they charged.

 

[Mille Pun]

I would suggest the autopilot feature, once enabled, is transferable when user switch to a new Tesla vehicle. Say, if user purchased madel S with AP now, he/she can transfer this feature to their new Tesla later, given that 1AP purchase can only apply to 1 vehicle at any given time

 

[zammboss]

Crossing my fingers that it was part of the special gift for the ones who waited outside

I can believe that this is possible as while I was waiting in line, a guy was telling us a story of when he ordered his Model S. It was apparently the last batch before they moved to their new store location in my city. And somehow they treated all their first customers or something with autopilot for free. so here is to hope!

 

[M0DEL³]

I do not subscribe to either the OP's premise or argument. The primary reason many platforms have gone to freemium models is that the economics have shifted from customer direct pay models to data-minining/marketing models - his example of the Apple ecosystem is a prime example of this.

I actually prefer the software enabled options model that Tesla seems to be steering towards for many reasons:

<1> The idea of the hardware being baked in from the beginning offers customers a more dynamic purchase experience. If my situation changes in the future and I can add features later that I didn't realize at the time of purchase might become more valuable to me. This is a gain.

<2> The pay-to-play model offers Tesla a financial incentive to target engineering resources to ongoing improvements of those aspects of the vehicle interface where customers find the most value.

<3> Software is, perhaps, the most dynamically changing part of the engineering world. An ongoing revenue motivation is what motivates any company to continue to reinvest in their platforms. The lack of a strong revenue model is a primary explanation of why so much of the software in the Linux world stalls out at "just good enough" and you rarely see products with a "fit and finish" that comparable to commercially supported ecosystems.

I would not like seeing Tesla features shift to a monthly fee-for-service model (as some here have suggested), but pay-to-activate is, in my opinion, a huge step forward and I appreciate Tesla's trailblazing in this area.

 

[harry]

Well, in fairness, in the three-plus years we have had our S's Tesla has provided a LOT of software for free. Augmented, upgraded and completely new functions -- too many to list here, actually.

Mostly what we seem to be talking about here is stuff which also requires hardware. Tesla installs hardware for some functions in all cars for at least two reasons. First, it simplifies the manufacturing process. Second, it allows owners to add features which would be impossible/unfeasible to retrofit. Tesla obviously incurs a cost to install hardware, so the bet would be that many/most owners would buy the implementation of the features -- a buy which they couldn't do at any reasonable price otherwise. Seems like an advantage all around.

 

[roblab]

As Tesla is setting a new precedent, I believe it is critical that vehicles are not unnecessarily restricted or limited by putting software behind a paywall. The computer and technology industry as a whole, which I believe Tesla aligns with even more so than the automobile industry at this point in time, has been moving away from the model of paying for software or an operating system that has additional features in favor of a singular, unified base with free updates. Apple has it right with their devices by including all software features on every capable iPhone or Mac model, and releasing even major updates for free after users have already paid for the hardware -- and many technology companies have followed suit; charge solely for the hardware, not software. Tesla should not revive this backwards-thinking trend in cars that are frankly (beautiful, well-made) pieces of forward-moving technology.

Well, I, for one, disagree.

Tesla is not Apple. Apple can turn out 20 different products, so you can pay what you want for your needed capabilities. Tesla gives you one car and you can build it as you like it. Many people are too broke, too cheap, or too willing to let someone else pay for their car's functions.

It is rather obvious that putting in the hardware now, for all cars, is easier and cheaper and quicker to build than having to come back later and tear apart the dash or headliner to do it. Tesla can't put in the hardware for free, and is making you pay for that before you use it. When you can afford the hardware, they turn it on. I think they know that most will turn it on. Even if not, a second owner might want auto pilot even if the first owner couldn't "afford" it, or he might want to travel more, though the first owner never felt the need to leave town, and would be willing to have those options added. Thankfully it is just a switch instead of a major rebuild of the car!

Many of Tesla's improvements are done over the air, as you know. We aren't talking about simple upgrades. We are talking about functionality that is there, that a certain group of people don't want to pay for and who complain about having to pay for it. They want the best car in the world, for half the price of a Hyundai. These are the very ones who would drive 20 miles to get free charging every day to justify having to pay for having supercharging turned on, so they can save $5 on their home electric bill.

That's not how the world works.

Apple may see this idea and adopt it for themselves!