For those that don't care to read all of this, here's the short version:
If/When FSD is out of Beta and at least one U.S. city/state has approved driverless taxis to accept paid rides, the ASP (Average Selling Price) of Tesla vehicles will increase to approximately $150,000 USD. FSD price will increase to $25,000 USD.
-----
The reason... Tesla will need to incentivize people to purchase Tesla vehicles for use on their ride hailing network; which will increase the vehicle's utilization 5x to 10x. It would not fulfill Tesla's mission to sell a vehicle for an ASP of $50,000 where it will be used 5% to 10% of the day.
Elon has mentioned several times in the past that FSD will unlock the highest asset value change in history. He as also mentioned that FSD value is 100K. Not many people believe this (understandably). Even if FSD and Tesla Robotaxis are a reality, FSD eventually costing $100,000 seems way too high...doesn't it?
I believe a majority of people are misinterpreting his tweets/comments about FSD value. That $100,000 price tag does not have to be the upfront cost to purchase in order for its value to be worth that much. Most people that are familiar with Tesla's mission would ask "How does eventually charging 100K for FSD help in Tesla's goal to 'accelerate the world's transition to sustainable energy' if most cannot afford that price?". Well, Elon has answered this question in different ways throughout the years. A better question is "Who would pay that much for FSD, even if it is making money as a Robotaxi?" The answer...those that can afford it and calculated the potential net profit. With Tesla's recent price increases combined with the past ones over the course of a year. It's not hard to imagine future price increases to match the demand of those willing to purchase a Robotaxi.
-----------
Elon mentioned some statements on the Q4 2021 Earnings call about continuing to sell their vehicles at Tesla's current ASP for years to come. He said something to the effect of the cost of the vehicle is divided by 5 if it's utilized 5 times as much. Statements like these are breadcrumbs to help get a better understanding of what he's planning.
Demand for Teslas are high and seems to be looking like that will be the case for years (even without FSD). If FSD comes out of Beta and is approved by regulators, Tesla will have an even bigger (but good) problem on its hands. How to capture this new unlocked profit potential? Raise prices even further. Now Elon has already mentioned that FSD price will continue to increase. But...
1) I believe FSD price has a practically/functional limit well before $100K.
2) Just raising FSD wouldn't balance supply/demand.
I've heard Gali from Hyperchange mention FSD prices could reach $25K and I believe this would be approaching the practical limit. Here's the initial problem with increasing the price past that. The demand and wait time from people who plan on buying a Tesla without FSD is still there. Businesses who are willing and able to pay the FSD price are waiting with people that just want a Tesla without FSD. Just think about this recent FSD prioritization. People are still waiting to purchase a Tesla without FSD. These wait times could stretch past 12 months for practically all models; which does have precedence.
How does Tesla's ASP reach $150,000? By manipulating pricing in an effort to accomplish these 4 goals:
1) Increase car utilization as high as possible
2) Satisfy Robotaxi customer demand in whatever markets they're serving
3) Current/future Tesla owners have an incentive to put their vehicles on Robotaxi network
4) Tesla gets paid; either upfront or re-occurring revenue. Maximizing profits while balancing the other 3 goals.
Here's a pricing scenario in which the 4 goals get met. ASP of non-FSD purchased vehicles increases to $125,000. While FSD price is $25,000. It would remove almost all buyers that don't intend to put their car on the Tesla RoboTaxi network.
*For those individuals that would be upset that they can't afford those prices. Mostly those are the ones that don't want to share their vehicles. They can purchase another EV brand. To those individuals that say NO, I want a Tesla. I want to experience a Tesla...Hail a Tesla Robotaxi via app of course.
---------
Hearing what Elon and Tesla has said over the years about Automony and FSD. Then hearing Elon expressing his thoughts on the Q4 2021 Earning calls (especially about the "$25K" car). It all seems as though they're ready to change the purpose/reason to buy a Tesla once autonomy hits.
In order for the ASP to increase to $150,000, it would mean Tesla's current vehicles, S3XY and future vehicles would all have to sell at a BASE price near $125,000. Most people think at that price demand would fall off a cliff. But Tesla would be increasing the price to balance the demand. Because otherwise Tesla could make re-occuring revenue from making it a Robotaxi and not selling the car. At least with that price Tesla would get upfront Robotaxi cost for those businesses willing to pay.
---------
FSD Robotaxi will force Tesla's dramatic increase in ASP because the vehicle becomes a tool. It will produce multiples in profit versus its cost because of its increased utilization and usefulness to society. So every vehicle they sell without FSD lowers their ASP and future re-occurring revenue from that vehicle's non-participation in the Tesla Robotaxi network.
----
Where did I get the value of the Tesla's $150,000 ASP from? It's a result from Tesla balancing the demand for their vehicles versus their ability to accomplish the 4 goals I previously mentioned. During autonomy day, Elon mentioned the gross profit to an owner from a Robotaxi (after Tesla's cut) was ~$30,000 a year. The expected lifespan of the vehicle was ~11 years. So, $30,000 x 11 years = $330,000 in gross profit to the owner of a Robotaxi.
If I take the $300,000 (rounded down) in gross profit the owner would receive over the course of 11 years and divide it by 2 to equal $150,000. This would be the purchase price of a Robotaxi. It would incentivize a good majority of purchasers to keep their car on the Robotaxi network (re-occurring revenue for Tesla) and provide a one-time upfront revenue for Tesla. While still allowing the owner to receive ~$150,000 in gross profit over the lifetime of the vehicle.
----
If Tesla does not increase their ASP and simultaneously prioritize FSD purchased vehicles first, the added demand would not benefit Tesla or the waiting customers. There is a price balance required to remove those not willing to pay the new price for personal ownership versus those that are willing to pay and still see profit in Robotaxi.
----
A scenario where the 4 goals I mentioned are not met: a non-FSD purchased vehicle has an ASP $50,000 and FSD costs $100,000. Even Tesla prioritizing FSD purchased vehicles means there will still be people with non-FSD orders waiting in the back of the line for possibly years. Doesn't benefit either party.
ASP $125,000 + FSD $25,000 naturally removes people unwilling to pay the higher price but keeps those that still are willing to put their vehicles on the Robotaxi for the majority of the time.
----
If Tesla were to sell a vehicle (ASP ~$50,000) to a person without them purchasing FSD, none of the 4 goals would be met.
1) The vehicle (on average) would have low utilization. Parked outside of work or home most of the day.
2) The vehicle, not being a Robotaxi means it cannot be used by customers waiting for a ride
3) The personal owner that bought a Tesla without FSD has a weak incentive to put the vehicle on the network because they'd have to purchase the expensive FSD, share ~30% cut with Tesla, and clean/maintain the car more than usually due to higher utilization. The lower the FSD price is, the lower the incentive for personal owner
4) Most impactfully, Tesla only received a one-time $10k-15k gross profit on the vehicle.
If Tesla sold a vehicle (ASP ~$50k) to person/business with FSD, the 4 goals would be partially met.
1) The vehicle would multiple its utilization 2x, 4x, or 10x - all depends on how often its chosen to be put on the Robotaxi network.
2) The vehicle may or may not help satisfy the Robotaxi customer demand based on times the owner chooses to put the vehicle on the network.
3) This incentive varies depending on if the owner is a business or a personal owner.
4) Tesla would receive a one-time $10k-15k gross profit and a relatively small unpredictable re-occurring revenue. *Not a maximizing profit potential senerio*
--------
If/When FSD is out of Beta and at least one U.S. city/state has approved driverless taxis to accept paid rides, the ASP (Average Selling Price) of Tesla vehicles will increase to approximately $150,000 USD. FSD price will increase to $25,000 USD.
-----
The reason... Tesla will need to incentivize people to purchase Tesla vehicles for use on their ride hailing network; which will increase the vehicle's utilization 5x to 10x. It would not fulfill Tesla's mission to sell a vehicle for an ASP of $50,000 where it will be used 5% to 10% of the day.
Elon has mentioned several times in the past that FSD will unlock the highest asset value change in history. He as also mentioned that FSD value is 100K. Not many people believe this (understandably). Even if FSD and Tesla Robotaxis are a reality, FSD eventually costing $100,000 seems way too high...doesn't it?
I believe a majority of people are misinterpreting his tweets/comments about FSD value. That $100,000 price tag does not have to be the upfront cost to purchase in order for its value to be worth that much. Most people that are familiar with Tesla's mission would ask "How does eventually charging 100K for FSD help in Tesla's goal to 'accelerate the world's transition to sustainable energy' if most cannot afford that price?". Well, Elon has answered this question in different ways throughout the years. A better question is "Who would pay that much for FSD, even if it is making money as a Robotaxi?" The answer...those that can afford it and calculated the potential net profit. With Tesla's recent price increases combined with the past ones over the course of a year. It's not hard to imagine future price increases to match the demand of those willing to purchase a Robotaxi.
-----------
Elon mentioned some statements on the Q4 2021 Earnings call about continuing to sell their vehicles at Tesla's current ASP for years to come. He said something to the effect of the cost of the vehicle is divided by 5 if it's utilized 5 times as much. Statements like these are breadcrumbs to help get a better understanding of what he's planning.
Demand for Teslas are high and seems to be looking like that will be the case for years (even without FSD). If FSD comes out of Beta and is approved by regulators, Tesla will have an even bigger (but good) problem on its hands. How to capture this new unlocked profit potential? Raise prices even further. Now Elon has already mentioned that FSD price will continue to increase. But...
1) I believe FSD price has a practically/functional limit well before $100K.
2) Just raising FSD wouldn't balance supply/demand.
I've heard Gali from Hyperchange mention FSD prices could reach $25K and I believe this would be approaching the practical limit. Here's the initial problem with increasing the price past that. The demand and wait time from people who plan on buying a Tesla without FSD is still there. Businesses who are willing and able to pay the FSD price are waiting with people that just want a Tesla without FSD. Just think about this recent FSD prioritization. People are still waiting to purchase a Tesla without FSD. These wait times could stretch past 12 months for practically all models; which does have precedence.
How does Tesla's ASP reach $150,000? By manipulating pricing in an effort to accomplish these 4 goals:
1) Increase car utilization as high as possible
2) Satisfy Robotaxi customer demand in whatever markets they're serving
3) Current/future Tesla owners have an incentive to put their vehicles on Robotaxi network
4) Tesla gets paid; either upfront or re-occurring revenue. Maximizing profits while balancing the other 3 goals.
Here's a pricing scenario in which the 4 goals get met. ASP of non-FSD purchased vehicles increases to $125,000. While FSD price is $25,000. It would remove almost all buyers that don't intend to put their car on the Tesla RoboTaxi network.
*For those individuals that would be upset that they can't afford those prices. Mostly those are the ones that don't want to share their vehicles. They can purchase another EV brand. To those individuals that say NO, I want a Tesla. I want to experience a Tesla...Hail a Tesla Robotaxi via app of course.
---------
Hearing what Elon and Tesla has said over the years about Automony and FSD. Then hearing Elon expressing his thoughts on the Q4 2021 Earning calls (especially about the "$25K" car). It all seems as though they're ready to change the purpose/reason to buy a Tesla once autonomy hits.
In order for the ASP to increase to $150,000, it would mean Tesla's current vehicles, S3XY and future vehicles would all have to sell at a BASE price near $125,000. Most people think at that price demand would fall off a cliff. But Tesla would be increasing the price to balance the demand. Because otherwise Tesla could make re-occuring revenue from making it a Robotaxi and not selling the car. At least with that price Tesla would get upfront Robotaxi cost for those businesses willing to pay.
---------
FSD Robotaxi will force Tesla's dramatic increase in ASP because the vehicle becomes a tool. It will produce multiples in profit versus its cost because of its increased utilization and usefulness to society. So every vehicle they sell without FSD lowers their ASP and future re-occurring revenue from that vehicle's non-participation in the Tesla Robotaxi network.
----
Where did I get the value of the Tesla's $150,000 ASP from? It's a result from Tesla balancing the demand for their vehicles versus their ability to accomplish the 4 goals I previously mentioned. During autonomy day, Elon mentioned the gross profit to an owner from a Robotaxi (after Tesla's cut) was ~$30,000 a year. The expected lifespan of the vehicle was ~11 years. So, $30,000 x 11 years = $330,000 in gross profit to the owner of a Robotaxi.
If I take the $300,000 (rounded down) in gross profit the owner would receive over the course of 11 years and divide it by 2 to equal $150,000. This would be the purchase price of a Robotaxi. It would incentivize a good majority of purchasers to keep their car on the Robotaxi network (re-occurring revenue for Tesla) and provide a one-time upfront revenue for Tesla. While still allowing the owner to receive ~$150,000 in gross profit over the lifetime of the vehicle.
----
If Tesla does not increase their ASP and simultaneously prioritize FSD purchased vehicles first, the added demand would not benefit Tesla or the waiting customers. There is a price balance required to remove those not willing to pay the new price for personal ownership versus those that are willing to pay and still see profit in Robotaxi.
----
A scenario where the 4 goals I mentioned are not met: a non-FSD purchased vehicle has an ASP $50,000 and FSD costs $100,000. Even Tesla prioritizing FSD purchased vehicles means there will still be people with non-FSD orders waiting in the back of the line for possibly years. Doesn't benefit either party.
ASP $125,000 + FSD $25,000 naturally removes people unwilling to pay the higher price but keeps those that still are willing to put their vehicles on the Robotaxi for the majority of the time.
----
If Tesla were to sell a vehicle (ASP ~$50,000) to a person without them purchasing FSD, none of the 4 goals would be met.
1) The vehicle (on average) would have low utilization. Parked outside of work or home most of the day.
2) The vehicle, not being a Robotaxi means it cannot be used by customers waiting for a ride
3) The personal owner that bought a Tesla without FSD has a weak incentive to put the vehicle on the network because they'd have to purchase the expensive FSD, share ~30% cut with Tesla, and clean/maintain the car more than usually due to higher utilization. The lower the FSD price is, the lower the incentive for personal owner
4) Most impactfully, Tesla only received a one-time $10k-15k gross profit on the vehicle.
If Tesla sold a vehicle (ASP ~$50k) to person/business with FSD, the 4 goals would be partially met.
1) The vehicle would multiple its utilization 2x, 4x, or 10x - all depends on how often its chosen to be put on the Robotaxi network.
2) The vehicle may or may not help satisfy the Robotaxi customer demand based on times the owner chooses to put the vehicle on the network.
3) This incentive varies depending on if the owner is a business or a personal owner.
4) Tesla would receive a one-time $10k-15k gross profit and a relatively small unpredictable re-occurring revenue. *Not a maximizing profit potential senerio*
--------
