I must be missing something. I thought FSD revenue is a deferred revenue and thus not included in the gross margin until the features are in, so how can he say that Tesla is increasing its dependence on FSD take rates to meet its gross margin target?
"New FSD" is only partly deferred since some features are functional. I don't know how much of it they recognize. As for margins, during the earnings call the DB guy asked:
Just first question on the guidance, I know previously there was a target out there of 25% kind of on S and X and Model 3. Just wondering is the updated one is that suggesting that that's no longer in play for the year or kind of what are the implications with today's update?
Elon Musk
Well, if you factor in the full self-driving option. I think it is in play for the year. We seem to get the features done, make sure they are great, roll them out, and recognize revenue and increase the take rate on full self-driving. There's also – for the existing fleet, there's a very significant opportunity to upgrade the existing fleet to full self-driving. Since mostly he has not purchased this option yet. So there's a significant margin potential for the existing fleet to upgrade to full self-driving, which most of the fleet can. So, yes, absolutely, I think, like long term we are talking 25%, 30%. Not long term meaning like a year. Long term, like, in terms of vernacular that 30% gross margin is I think quite likely.
Zach and Jerome went on to talk about manufacturing cost reductions, but it's pretty easy to read the above as "forget about 25% until we start recognizing lots of FSD revenue".
