Hamartia Antidote
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Tesla is under regulators’ scrutiny for its lax approach to self-driving, but the company pedals on relentlessly. During the Q4 2022 earnings call, Tesla revealed that all customers who paid for the FSD capability in Northern America can now enjoy AI-powered self-driving. We’re looking at around 400,000 paying customers out of a 3.6 million base of compatible vehicles.
Despite promising a wide rollout years ago and “cracking” full-self-driving literally “sometime next year” for many years, the FSD software remains in the beta stage. More than that, the beta program is currently open exclusively to customers in Northern America. Even those were in limited numbers, based on esoteric criteria like Safety score, region, etc. The situation dramatically changed in December last year after Tesla announced opening the program to all paying customers in North America.
Immediately after that, Tesla announced that 285,000 beta testers paid to test the self-driving features. The number has increased since then, and Tesla reported in its shareholder deck that 400,000 users have enrolled in the FSD Beta program. More importantly, almost all Tesla owners in the U.S. and Canada can now access FSD Beta either by buying the feature or through a subscription. This is a boon for Tesla, and Elon Musk thinks this would become a major revenue stream for the company.
“With respect to Autopilot, as of now, we deployed full self-driving beta on city streets to roughly 400,000 customers in North America,” Musk said in reply to an investor’s question. “This is a huge milestone for autonomy as FSD beta is the only way any consumer can actually test the latest AI-powered autonomy. And we’re currently at about 100 million miles of FSD outside of highways. And our published data shows that improvement in safety statistics is very clear.”
With all those millions of miles driven on FSD come heaps of data for Tesla neural network to analyze and improve the system. Elon Musk can’t stress enough that Tesla is as much a software company as it is a hardware one. But it’s much more than that: it’s one of the world’s leading AI companies, which is a huge advantage compared to other carmakers trying to compete in the EV segment. According to Musk, the HW3 computer is “still the most efficient inference computer in the world,” despite being five years old from the design point.
Nevertheless, Hardware 4 is coming with the Cybertruck, and Musk confirmed that an HW5 is also in the works. That being said, Full Self-Driving has the potential to become one of Tesla’s most important revenue streams in the future. Musk was very bullish about that, saying that FSD can help increase the car’s value tremendously with a flip of a switch.
“Every time we sell a car, it has the ability just from uploading software to have Full Self-Driving enabled,” said Musk. “And the Full Self-Driving is obviously getting better very rapidly. So that’s actually a tremendous upside potential because [...] only a small percentage of cars don’t have HW3. So that means that there are millions of cars where Full Self-Driving can be sold at essentially 100% gross margin. And the value of FSD grows as the autonomous capability grows, and then when it becomes fully autonomous, that leads to a value increase in the fleet. That might be the biggest asset value increase of anything in history.”
Despite Musk’s optimism, the Full Self-Driving software is now under scrutiny after several high-profile crashes happened while the software was in control of the car. Tesla is very upfront about the FSD still needing constant supervision, but the wording is confusing for many people. Tesla insists, though, that its internal data, also shared in the shareholder deck, shows marked safety improvements when driving with self-driving technology versus driving without. Nevertheless, the software would face regulatory hurdles before being allowed in Europe. This is one of the main reasons the FSD Beta program is not yet available to European customers.
