Tesla will likely roll out a monthly subscription plan for customers who aren't yet ready to drop $7,000 upfront for its self-driving technology (TSLA)

April 30, 2020

Tesla will likely roll out a monthly subscription plan for customers who aren't yet ready to drop $7,000 upfront for its self-driving technology (TSLA)

Elon Musk and Tesla

Tesla plans to offer its self-driving technology as a subscription service "probably towards the end of this year," CEO Elon Musk told investors during the company's quarterly earnings call on Wednesday.
Tesla's "Full Self-Driving" feature, which helps the vehicle navigate highways and park on its own, is available for $7,000 for customers who purchase it upfront.
CFO Zach Kirkhorn said buying the feature upfront will still be "the least expensive plan," but a subscription option would let customers take advantage later or spread the costs over time.
Tesla's announcement comes as Apple just announced a 16% year-over-year jump in its services revenue and subscription businesses are taking off across various industries.
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Tesla is planning to let customers take advantage of its self-driving technology through a subscription plan, CEO Elon Musk announced during the company's quarterly earnings call Wednesday.

"I think we will offer Full Self-Driving as a subscription service, but it will be probably towards the end of this year," Musk said.

Full-Self Driving, the more expensive version of Tesla's Autopilot feature, helps the vehicle navigate highways, change lanes, and park with reduced driver intervention. Earlier in April, Musk announced in a tweet that, on July 1, Tesla would be increasing the price of the feature, which currently costs $7,000 for customers who purchase it upfront.

"I should say, it will still make sense to buy FSD as an option as in our view, buying FSD is an investment in the future. And we are confident that it is investment that will pay off to the consumer, Musk said Wednesday. "In my opinion, buying FSD option is something people will not regret doing."

Chief Financial Officer Zach Kirkhorn said on the call that buying the self-driving feature upfront and paying it off as part of a loan on the vehicle would be "the least expensive plan," but added that a subscription model would help the company onboard customers who don't go that route.

"We do understand that some customers who have ownership or have leased their vehicles did not purchase that option upfront. And so this will enable those customers to spread out the cost of ownership of FSD or subscription over time," Kirkhorn said.

Tesla has raised the feature's price in the past — most recently in November, when the cost increased from $6,000 to $7,000 after Tesla rolled out its problematic "Smart Summon" feature, which is included in the Full Self-Driving option.

But Musk has repeatedly set and missed aggressive goals for the rollout of Tesla's "Full Self-Driving" feature. In early 2019, Musk said he was "certain" that "the car will be able to find you in a parking lot, pick you up, take you all the way to your destination without an intervention — this year."

In 2016, Musk said a Tesla would be able to drive itself from Los Angeles to New York City by the end of 2017, and the company has faced criticism for the misleading nature of naming features that are not fully autonomous as "Autopilot" and "Full Self-Driving."

However, Tesla shares spiked as much as 9% on Thursday, adding as much as $13 billion to the company's market cap as it beat analyst expectations, despite Musk going on a profanity-laced rant against coronavirus shelter-in-place orders.

Tesla's plan to offer a subscription model for its self-driving features could help it capitalize on rising consumer interest in subscription plans across other industries. On Thursday, Apple announced that, despite missing its initial expectations for its second quarter, the company's services business saw a 16% year-over-year jump, while streaming companies like Netflix and Spotify as well as cloud businesses for Amazon, Google, and Microsoft have all skyrocketed amid coronavirus lockdowns.

Tim Levin contributed reporting to this story.

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