Too much focus on FSD?

[Kmartyn]

Tesla said it was time for a great EV, and others laughed it off. Tesla made a big gamble and won. All major automotive manufacturers now have to respond, or face extinction. VW has publicly thanked them for this wake up call.

It took a tremendous amount of resources, and the result is some truly amazing EVs. Now they are making a second majorly disruptive bet, FSD, and Robo taxis. Per Elon, FSD development is chewing up most of their resources. This threatens their viability, and steals resources from further updates and development of their EVs.

At this point, I expect the majority of people in the market for an EV, want just that, a great EV, not a Robo Taxi.

It took some time, but I believe Tesla has developed a core competency in designing and build EVs, but still have much to do, expanding in that area. Instead they are betting the company on FSD.

Personally, I think they would be better to spend their money on an expanded model line up, lower cost vehicles, and increased production capability. I believe this is what the majority of the general public would buy at this time.

FSD should be extra icing on the cake, not the cake itself.

 

[Gen3]

I guess it depends on the timeframe til Robo taxis are a real thing. If it’s in a few years, Tesla should go for it. If it’s a decade they should focus on the vehicles.

 

[Shock-On-T]

I've never understood the obsession with autopilot and FSD.
They are very convenient, but people seem to forget the big drawcard ... it's a bloody ELECTRIC CAR!!!
That's far more important to me, with the great driving feel, charging at home instead of going out for fuel, being transport-independent etc.

 

[ItsNotAboutTheMoney]

Adding FSD features that work would be a large differentiator.

Autopilot has been a sales driver.
Tesla has the hardware in the car.
Every sale of FSD is almost entirely margin.

Tesla desperately needs the margin from FSD sales.

So, no, there should not be less emphasis on FSD.

 

[EinSV]

One clarification -- Elon did not say FSD was taking up most of Tesla's resources. That would be absurd given how much Tesla is investing in vehicle production, batteries, etc. They just made a major investment in battery technology by acquiring Maxwell Technologies and are making huge investments in Gigafactory 3, plan to have the Semi and Model Y in production next year, etc.

What you may be referring to was that he was asked how much of Tesla's resources were being spent on self driving and he made a flip comment to the effect of "all of them." I believe what he meant is that the EV of the future would be autonomous, so Tesla's resources were centered around developing autonomous EVs, but that also includes the "EV" part.

As far as whether it's a good idea to focus on FSD, IMO it's the smart move. Tesla has developed a very powerful self-driving chip out of scratch and has some of the best AI talent in the world developing their neural nets for self driving. This is not new -- the Tesla Network has been part of Master Plan Part Deux since 2016 and the concept was around before then.

Since this is clearly the future direction of the industry Tesla would be foolish not to invest in it. I'm excited to see the first FSD features start to roll out later this year.

Elon is often over optimistic on timelines, but he usually delivers amazing results in the end.

 

[Kmartyn]

I've never understood the obsession with autopilot and FSD.
They are very convenient, but people seem to forget the big drawcard ... it's a bloody ELECTRIC CAR!!!
That's far more important to me, with the great driving feel, charging at home instead of going out for fuel, being transport-independent etc.

I agree completely. I think once you get out of the Tesla fan boy group ( of which I am certainly a member ), people can be interested, but cautious about a move from ICE to EV. When they read in the news that Tesla’s are self driving cars, it scares them away. Too big a change to seriously consider. When in reality, a move to an EV, could actually make things simpler for them, not more complex. If the money going towards FSD went to vehicles and production we would probably have the model y, and maybe the pickup in production now.

 

[Jonathantuba]

There will be different people in the development of FSD to developing EV cars, so both teams can work in their area at the same time. Slowing down FSD would not speed up car development.

 

[Kmartyn]

Adding FSD features that work would be a large differentiator.

Autopilot has been a sales driver.
Tesla has the hardware in the car.
Every sale of FSD is almost entirely margin.

Tesla desperately needs the margin from FSD sales.

So, no, there should not be less emphasis on FSD.

Autopilot is a driver assistance feature that most premium vehicles now have. FSD on the other hand, Is something the general population does not seem ready for yet. Yes Tesla needs the margin. Third parties have analyzed the M3 costs, and stated there is good margin in it, but it is eaten into by high autonomous driving development costs, which all Tesla vehicles must bare, even though the majority are not likely to buy FSD. I bought FSD, because I am a technical geek, a Tesla fan boy, and a person with better than average financial means. It is a very interesting technical novelty at this point I think, not a need to have.

Full disclosure, I am still waiting for my M3 to arrive, so I have not personally tried NOA yet.

 

[EVDRVN]

To answer this question one needs to know the percentage they are spending on this development. I don't think at this point the cost is the issue but rather the messaging and self imposed deadlines Elon makes which hurt the company far more than any incremental spending in this area. Not having this technology would kill the business long term and they are already vested so the question seems to answer itself.

 

[Kmartyn]

One clarification -- Elon did not say FSD was taking up most of Tesla's resources. That would be absurd given how much Tesla is investing in vehicle production, batteries, etc. They just made a major investment in battery technology by acquiring Maxwell Technologies and are making huge investments in Gigafactory 3, plan to have the Semi and Model Y in production next year, etc.

What you may be referring to was that he was asked how much of Tesla's resources were being spent on self driving and he made a flip comment to the effect of "all of them." I believe what he meant is that the EV of the future would be autonomous, so Tesla's resources were centered around developing autonomous EVs, but that also includes the "EV" part.

As far as whether it's a good idea to focus on FSD, IMO it's the smart move. Tesla has developed a very powerful self-driving chip out of scratch and has some of the best AI talent in the world developing their neural nets for self driving. This is not new -- the Tesla Network has been part of Master Plan Part Deux since 2016 and the concept was around before then.

Since this is clearly the future direction of the industry Tesla would be foolish not to invest in it. I'm excited to see the first FSD features start to roll out later this year.

Elon is often over optimistic on timelines, but he usually delivers amazing results in the end.

You are correct on my reference to Elon’s answer to a question at the investor event. However I don’t think there is one future direction for the industry in the near term. There are multiple directions of development. One is BEVs, another is Robo taxis based on FSD. These two directions should not be interdependent on each other because of the expense structure of the company. There should also not be the marketing confusion this approach creates in the general population of the car buyers. After all, the majority of Tesla’s marketing, is what Elon is reported as saying. They don’t currently do anything to advertise a more balanced message.

Yes I agree that Elon is overly optimistic on time frames. When he announces one, I tend to multiply by 3. Just one more reason to focus on the great EVs they have now, and see where the industry is on FSD 3-5 years from now.

 

[Kmartyn]

There will be different people in the development of FSD to developing EV cars, so both teams can work in their area at the same time. Slowing down FSD would not speed up car development.

They have only one balance sheet, and have cash flow constraints. To add to one group takes from another. This is just the reality of business. So far Tesla has not followed normal guidelines, and that may be the secret to their success, but you can’t do that forever. You don’t have to win all the races, just a lot of them to be successful.

 

[EinSV]

You are correct on my reference to Elon’s answer to a question at the investor event. However I don’t think there is one future direction for the industry in the near term. There are multiple directions of development. One is BEVs, another is Robo taxis based on FSD. These two directions should not be interdependent on each other because of the expense structure of the company. There should also not be the marketing confusion this approach creates in the general population of the car buyers. After all, the majority of Tesla’s marketing, is what Elon is reported as saying. They don’t currently do anything to advertise a more balanced message.

Yes I agree that Elon is overly optimistic on time frames. When he announces one, I tend to multiply by 3. Just one more reason to focus on the great EVs they have now, and see where the industry is on FSD 3-5 years from now.

Because of lower cost of fuel and maintenance costs, the only Robotaxi that makes sense in the long-term is an EV. Uber's CEO disagrees with Elon on the timing of FSD but has said "First of all, it has got to be electric. We think that's a no brainer."
Elon Musk is wrong on robotaxi timing, Uber CEO Dara Khosrowshahi says

There may be some plug-in hybrids, etc., in the short term but that won't last long.

In any case, it's not like Tesla can hide from having self-driving cars -- it will start rolling out FSD features in a few months with a goal of being "feature complete" later this year, which I interpret to mean having all the basic building blocks of FSD (right and left turns, stopping for stop signs and stop lights, etc.) but still needing close supervision from the driver/hands on wheel.

Tesla already has development software that is driving the cars. When each feature is safe enough, they'll start rolling it out to customers.

It would be strange if Tesla were not talking about self-driving when the cars people are buying now will start doing more and more of the driving tasks beginning in a few months. With close adult supervision from the human driver of course, at least initially.

 

[ItsNotAboutTheMoney]

Autopilot is a driver assistance feature that most premium vehicles now have. FSD on the other hand, Is something the general population does not seem ready for yet. Yes Tesla needs the margin. Third parties have analyzed the M3 costs, and stated there is good margin in it, but it is eaten into by high autonomous driving development costs, which all Tesla vehicles must bare, even though the majority are not likely to buy FSD. I bought FSD, because I am a technical geek, a Tesla fan boy, and a person with better than average financial means. It is a very interesting technical novelty at this point I think, not a need to have.

Full disclosure, I am still waiting for my M3 to arrive, so I have not personally tried NOA yet.

The margins on SR very obviously suck. Hence the creeping price increases and the failure to push SR hard to Europe. If Tesla can't lower production costs then it has to try to sell more options.

Tesla's going to miss its 2019Q2 sales guidance by a large chunk. It needs more margin per car. FSD is the only thing that can deliver significantly more margin.

(FSD isn't autonomy. It's just trying making driver assistance better and to sell it. Ignore the robotaxi spiel. That was just trying to sucker investors and consumers into giving Tesla more cash.)

 

[gnuarm]

Autopilot is a driver assistance feature that most premium vehicles now have. FSD on the other hand, Is something the general population does not seem ready for yet. Yes Tesla needs the margin. Third parties have analyzed the M3 costs, and stated there is good margin in it, but it is eaten into by high autonomous driving development costs, which all Tesla vehicles must bare, even though the majority are not likely to buy FSD. I bought FSD, because I am a technical geek, a Tesla fan boy, and a person with better than average financial means. It is a very interesting technical novelty at this point I think, not a need to have.

Full disclosure, I am still waiting for my M3 to arrive, so I have not personally tried NOA yet.

As others have pointed out, self driving software development and car development/production are not mutually exclusive. Even if they have the software ready to roll in a couple of years, the legal framework won't be in place for some time to come. That will be the big hold up. So don't expect full self driving to be ready for prime time any time soon.

As for Navigate on Autopilot, don't expect a lot from it. It does very little that the autopilot doesn't already do. In my car I still have to confirm lane changes and the bloody tool is always asking me to do a lane change one way or the other. It even asks me to go to the right lane when I have a left exit coming up, then it immediately wants to move left again, of course. When I'm in the left lane and there are left exits it keeps telling me I need to get right to stay on the correct path.

I have an update waiting for me to test, but it loaded quickly, so I don't think it will be anything significant. Bottom line is the improvements are happening, but slowly.

 

[ForeverFree]

Tesla said it was time for a great EV, and others laughed it off. Tesla made a big gamble and won. All major automotive manufacturers now have to respond, or face extinction. VW has publicly thanked them for this wake up call.

It took a tremendous amount of resources, and the result is some truly amazing EVs. Now they are making a second majorly disruptive bet, FSD, and Robo taxis. Per Elon, FSD development is chewing up most of their resources. This threatens their viability, and steals resources from further updates and development of their EVs.

At this point, I expect the majority of people in the market for an EV, want just that, a great EV, not a Robo Taxi.

It took some time, but I believe Tesla has developed a core competency in designing and build EVs, but still have much to do, expanding in that area. Instead they are betting the company on FSD.

Personally, I think they would be better to spend their money on an expanded model line up, lower cost vehicles, and increased production capability. I believe this is what the majority of the general public would buy at this time.

FSD should be extra icing on the cake, not the cake itself.

Yes!

Plus better purchase/service communication, more consistent service experiences, and continued Supercharger expansion.

Autopilot is great. FSD is further away than Elon believes. In the meantime, AP improvement is great, gradual FSD pursuit is great, but let's focus on the basics, please.

 

[EVDRVN]

Well if the go BK they can get into gaming.

 

[neroden]

I don't think the FSD team actually costs that much, so I don't think they need to cut FSD spending.

I do, however, think they need to shut up about self-driving and focus on selling electric cars. Self-driving is vaporware. Electric cars are real.

 

[neroden]

The margins on SR very obviously suck. Hence the creeping price increases and the failure to push SR hard to Europe. If Tesla can't lower production costs then it has to try to sell more options.

Well, SR is already basically gone in favor of SR+, which costs what SR was originally supposed to cost plus inflation adjustment. Margins on SR+ seem to be fine.

Tesla is, of course, lowering production costs; this is something Musk has proven to be genuinely good at, from the Roadster days onward. I'm not worried about that at all; it's an area Tesla is actually good at.

A bigger problem is that Tesla has still been hamstrung by failure to make and deliver enough cars. Margins can be good, but if volume isn't good, that doesn't cover your fixed costs, and that's *always* been the situation Tesla's been dealing with.

In Q1, Panasonic wasn't producing enough cells. Shifting to SR/SR+ helped some, but Panasonic said they needed to revise tooling to get the targeted output rate out of the cell lines, and that the new tooling will be installed in June. So don't expect enough cars to be produced until Q3.

Tesla's going to miss its 2019Q2 sales guidance by a large chunk. It needs more margin per car.

No, Tesla primarily needs to produce more cars. Some of the first-day reservation holders are STILL waiting for their Model 3s, particularly those who want white interiors and ordered SR+.

FSD is the only thing that can deliver significantly more margin.

(FSD isn't autonomy. It's just trying making driver assistance better and to sell it. Ignore the robotaxi spiel. That was just trying to sucker investors and consumers into giving Tesla more cash.)

 

[J X 3]

Cars are a luxury item, the 1.3 billion people in OECD nations travel by car about as much as the other 6 billion.
Car as a service can offer 10 times better value than ownership and can easily quadruple the number of miles traveled by car globally. It's a deal you can;t refuse and it greatly expands the market for cars.
It also captures the entire cost of ownership of a car, not just the vehicle - so fuel, insurance, maintenance, repairs, parking and so on. It's gonna be a market worth many trillions per year and will be owned by 3-4 global players, marketing and scale make impossible for many players to survive.
Anyone that wants to sell cars in the long run, is mental. Car as a service will obliterate sales, for Tesla and all other car makers this is a matter of survival. Tesla has a 70-80% chance to be one of the 3-4 players in car as a service, Toyota has a 5% chance to be in the car business in 10 years from now.
I will note that car as a service is not some kind of new plan for Tesla, this trajectory was known for years. This is by far the biggest opportunity Tesla will ever have and they don't actually have a choice if they want to survive.

With car ownership, Tesla has a few thousand dollars per unit cost advantage vs folks that use Nvidia or Intel silicon and Lidar.That's a gigantic cost advantage and they hope to have FSD years before most others. It would be a major competitive advantage.
AP and FSD also help margins and attach rates are ramping as these features improve.It's not just costs, there are returns with car sales too.

You also need to freak out less about their financials. Tesla screwed up the production line for Model 3 in Fremont and they have lower than planned margins. The thing is, it's just one vehicle in one location and as Model 3 ramps in China, Model Y first in the US and then elsewhere, then Roadster, Semi, pickup truck and so on, it gets much much easier to get to margins even if Model 3 at Fremont is still bellow average. With revenue growth they also grow into the OPEX.

 

[gnuarm]

Cars are a luxury item, the 1.3 billion people in OECD nations travel by car about as much as the other 6 billion.
Car as a service can offer 10 times better value than ownership and can easily quadruple the number of miles traveled by car globally. It's a deal you can;t refuse and it greatly expands the market for cars.
It also captures the entire cost of ownership of a car, not just the vehicle - so fuel, insurance, maintenance, repairs, parking and so on. It's gonna be a market worth many trillions per year and will be owned by 3-4 global players, marketing and scale make impossible for many players to survive.
Anyone that wants to sell cars in the long run, is mental. Car as a service will obliterate sales, for Tesla and all other car makers this is a matter of survival. Tesla has a 70-80% chance to be one of the 3-4 players in car as a service, Toyota has a 5% chance to be in the car business in 10 years from now.
I will note that car as a service is not some kind of new plan for Tesla, this trajectory was known for years. This is by far the biggest opportunity Tesla will ever have and they don't actually have a choice if they want to survive.

I agree that over the long haul the auto industry will head toward autos as a service, not as things to be owned. But that is only after self driving is universal. At that point it will only be the wealthy who want to own cars so they don't need to sit in chewing gum or whatever.

I don't agree with the details of what you wrote. I think it may be as long at 10 years before we even see self driving available in any real sense. Tesla may not even be around then.

With car ownership, Tesla has a few thousand dollars per unit cost advantage vs folks that use Nvidia or Intel silicon and Lidar.That's a gigantic cost advantage and they hope to have FSD years before most others. It would be a major competitive advantage.
AP and FSD also help margins and attach rates are ramping as these features improve.It's not just costs, there are returns with car sales too.

Why does Tesla have any price advantage for self driving? Right now they are burdened with the cost of the hardware on models they aren't even charging for the feature.

You also need to freak out less about their financials. Tesla screwed up the production line for Model 3 in Fremont and they have lower than planned margins. The thing is, it's just one vehicle in one location and as Model 3 ramps in China, Model Y first in the US and then elsewhere, then Roadster, Semi, pickup truck and so on, it gets much much easier to get to margins even if Model 3 at Fremont is still bellow average. With revenue growth they also grow into the OPEX.

LOL! The financials are what will allow them to survive as a company. If they can't build up their cash reserves and become solidly profitable as a company by the end of this year, they may not make it through 2020.

No one knows how well the model Y will be received. EVs are not a hot selling car in general and Tesla got a lot of of exposure on the model 3. The model Y is nearly the same car and won't have nearly as much hype. In fact, this is probably why Tesla is going out for more capital in part. They didn't bring in half a billion dollars in reservation money. By the time the Y is out there will be some competition. It won't be strong, but people won't be rushing headlong into buying a Tesla nearly sight unseen.

Tesla will have to start acting like a mature car company. I've said that all along. There is nothing assured about Tesla's survival.