The real reason Tesla may be giving free trials of its Full Self-Driving software

Tesla is giving a way a month of free Full Self-Driving.Carlos Osorio

Tesla is offering a free monthlong trial of its Full Self-Driving software.
The driver-assist software is a $12,000 or $199 per month add-on.
FSD adoption could significantly increase Tesla’s profit margins and improve the software.

Tesla has launched a series of initiatives over the past week designed to promote its Full Self-Driving software — the effort could help increase adoption and improve the software in the long term.

Tesla CEO Elon Musk announced on Monday that the electric carmaker would offer its US customers a free trial of the driver-assist software starting this week.

“All US cars that are capable of FSD will be enabled for a one month trial this week,” Musk wrote on X.

The billionaire also sent a companywide email on Monday morning telling staff to take customers on a “short test ride” using the carmaker’s latest FSD software at delivery and after service visits, according to two emails viewed by Business Insider.

“Almost no one actually realizes how well (supervised) FSD actually works,” Musk wrote in the email.

All current Tesla models come with the carmaker’s Autopilot driver-assist program. But Tesla owners can also buy the company’s FSD beta feature as an add-on either at a $12,000 flat rate or as a $199 monthly subscription.

The FSD beta feature enables the vehicle to automatically change lanes, park on its own, enter and exit highways, and it can also recognize stop signs and traffic lights. It still requires a licensed driver to monitor the system at all times.

An increase in FSD subscriptions — a feature that can be installed via an over-the-air update at virtually no cost to Tesla — could significantly increase the company’s profit margins. The software also learns in real time by collecting driver data, so the more people Tesla can get using FSD on the road, the faster the system will learn. Musk initially had the goal of getting one million FSD users. As of February 2023, the carmaker said it had about 400,000 FSD users.

“There is financial incentive in mandating a demo of FSD upon delivery. (Tesla’s average selling price is $45k; Cost to produce is $36k; Incremental sales of $12k software add-ons is highly gross margin accretive) But the strategic considerations are probably paramount. A happy FSD user will exhort friends and family to buy Tesla,” Brett Winton, director of research at ARK Invest, wrote in a post on X that Musk responded to saying “Absolutely.” (Ark Invest’s CEO, Cathie Wood, has invested hundreds of millions of dollars into Tesla.)

A spokesperson for Tesla did not immediately respond to a request for comment.

Tesla has worked to make FSD more attractive to Tesla owners in the past, including dropping the price by $3,000 last fall and allowing owners to transfer the software between cars for a brief period of time.

In the past Musk has emphasized the importance of Tesla’s plans for autonomous driving. During an earnings call last year, Musk said that Tesla could theoretically sell its cars for “zero profit” because of the technology.

“We’re the only ones making cars that technically we could sell for zero profit for now, and then yield actually tremendous economics in the future through autonomy,” Musk said April 19, 2023. “I’m not sure how many of you will appreciate the profundity of what I’ve just said, but it is extremely significant.”

Musk has characterized Tesla’s latest version of FSD, which began rolling out this month, as “mind-blowing.” But the billionaire has been promising self-driving cars for years and Tesla’s beta software is still only level 2, meaning it requires a licensed driver to monitor it.

The software has also come under increased scrutiny from regulators over the past few years. Last year, Tesla issued a recall via an over-the-air update to address concerns from the National Highway Traffic Safety Administration regarding the software’s tendency to “act unsafe around intersections.”

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