Tesla Inc (NASDAQ:TSLA, ETR:TL0) slipped lower in pre-market trading after the electric car maker cut the monthly price of its full self-driving (FSD) service.
The cost of a monthly subscription to the driver-assist software was cut in half to $99 a month in the US from the $199 price that has stood for the past three years, despite boss Elon Musk having said prices of FSD would keep increasing as improvements were made.
Tesla revealed the new monthly cost in a post on X, where it also tweaked the name of the Level 2 driver-assist system to “FSD (Supervised)”,
This seems partly to remind drivers that they need to pay attention and be ready to take control after the company was criticized for failing to include proper driver monitoring protection to discourage drivers from relying on the system.
The move follows last year's cut of the up-front FSD package price from $15,000 to $12,000 and the company's free FSD demo drive for all new deliveries, with all customers in North America offered a one-month free FSD trial.
Last month Tesla also launched the latest version of the technology, FSD v12, fully-powered by AI, using what Musk has called "end-to-end neural networks". This means the decision-making for a vehicle’s controls is handled by neural nets, ie AI, rather than being coded by programmers.
Coming in August, Musk also recently flagged, will be a "Robotaxi reveal", though it was a surprise to many, as no regulatory application for robotaxis in the US has yet been made.
Tesla shares were down 0.7% at $169.90 ahead of the opening bell on Monday, down 31% in the year to date.
Analysts at UBS estimated there are roughly 2 million Teslas on the road with FSD Computer 3 or more which is needed for FSD capability.
"We estimate every 5% take-rate (for a full-year) is ~$120mm in incremental revenue and profit (considering no incremental cost) or ~$0.03 in EPS. This does provide an avenue of revenue/earnings growth amid what we believe is more stagnant vehicle unit demand.
"It's possible Tesla is also using the lower FSD pricing (and the free trial) to try to stimulate demand, especially since inventories are higher."
The Swiss bank said it believes that Tesla would need to lower the price of the upfront purchase price to have higher upfront take-rates with the monthly price cut to $99/month "likely to cause other OEMs to re-evaluate their pricing strategy and efforts to generate more subscription services".