A fundamental part of its upcoming narrative has recently been destabilized.
Tesla is confronting some significant challenges, and I’m not just referring to their recent announcement of a reduction by over 10% in their global staff. This issue is merely a superficial scratch compared to the earth-shaking predicament Tesla has just walked into. The company is not just dealing with a sales slump that’s declining more rapidly than the public faith in Musk, but they’ve also steeply cut down Full Self-Driving (FSD) subscription rates from $199 to $99 per month. This desperate move to increase revenue is a tactic to compensate for their dismal sales. This may seem like a minor point to an average person, but for those who have been tracking Musk’s behavior over time, it’s more equivalent to Tesla inadvertently causing its own catastrophic damage. Allow me to elaborate.
Consistently, Musk has expressed that the real value of Tesla lies in its driverless vehicle technology. While this may seem like an overstatement, it’s not much of an exaggeration. FSD, or fully self-driving function, is designed to evolve into a completely autonomous vehicle and was formerly priced at $199 per month or a one-time fee of $12,000. Contrarily, Musk believes that the actual value of FSD is significantly undervalued and should be around $100,000 per vehicle. Financial backers have confidence in Musk’s forecasts, with Cathy Woods from Ark Invest estimating that by 2027, Tesla’s worth will multiply by 11 times – based on the potential worth of FSD alone! Directly translated, the words of Woods and Musk stimulate purchase interest, inflating Tesla’s market value beyond its current standing. So it’s not a stretch to say that without the anticipation surrounding its autonomous cars, Tesla’s worth would naturally be much lower than it stands now.
Musk has expressed his surprise about the potential of FSD surpassing the safety levels of human pilots, emphasizing that it functions almost autonomously, with the human driver’s presence required solely for legal adherence. Furthermore, he frequently declares that, as FSD’s capabilities enhance and it receives regulatory acceptance for lesser human intervention, its value will invariably escalate.
Hence, can you comprehend how decreasing FSD’s cost at present disrupts the future narratives and forecast set out by Musk and Wood for Tesla? The situation suggests two possibilities: either Musk overstates the efficacy of FSD, or buyers are reluctant to shell out thousands for autonomous vehicles. The evidence leans towards the former. Usage data shows that FSD is utilized merely 15% of the time by customers, implying a lack of faith in the system. Nonetheless, the necessity for Musk to halve FSD’s cost to boost its revenue also indicates that even the ones who accept Musk’s hyperbolic views of FSD aren’t ready to purchase it at the set prices.
A couple of counterpoints exist to this perspective. The initial one being that in order to accelerate the AI development, Tesla requires additional FSD drivers and a price reduction could facilitate this. Yet, with over 400,000 Teslas fitted with FSD on American roads only, it appears unlikely. The quantity of these cars is ample to provide the necessary information for their work.
The current scenario is that truly autonomous driving isn’t fully achieved yet, although Full Self-Driving (FSD) is set to drastically improve in the years ahead, resolving this issue. Elon Musk even announced that Tesla plans to invest $10 billion in AI infrastructure by 2024. Coupled with their soon-to-be-built Dojo supercomputer’s capability to simulate countless training algorithms, this should help their autonomous AI reach unprecedented levels of driving automation.
However, this vision isn’t without obstacles. The first hitch is the unpredictability of larger training datasets improving AI. So, there’s no ironclad certainty that such a massive commitment will yield a significantly superior autonomous AI. Concerns around the “point of diminishing returns” also exist, where an excessive volume of training data needed to obtain a specific performance level leads to unmanageable complexity. Thus, it’s perfectly plausible that Tesla’s existing strategy might not result in a fully self-driven car.
The final stumbling block is that FSD solely relies on camera inputs to sense its surroundings, offering no system redundancy. Hence, without additional sensors like lidar, radar or ultrasonics to provide auxiliary data, even a successful AI expansion might not guarantee the inherent safety of FSD.
Despite the significant shortcomings of FSD, it seemed irrelevant. Over recent years, Tesla has been engaged in a vigorous campaign to persuade investors and market experts about the impending arrival of their ostensibly high-worth product. This situation led to a surge in Tesla’s share value, providing them with the means to secure funding, accelerate their production scale, and even offered Musk the financial backing to acquire Twitter. However, the abrupt decrease in FSD’s price has revealed a significant fissure in Tesla and Musk’s persuasive facade. This disclosure has likely initiated a series of events leading to a market recalibration, which threatens to dramatically plummet Tesla’s worth.
While it’s not a certainty that Tesla is on the brink of a cataclysmic event, the potential augmentation of AI training through Dojo might make a significant difference. This could lead to considerable enhancements, and possibly the inclusion of lidar and other sensors in Tesla’s forthcoming Model 2-alternative robotaxi, boosting its safety credentials. However, from my perspective, this seems improbable. Thus, Tesla’s decision to cut the cost of its Full Self-Driving (FSD) option could potentially indicate a drastic tumble from its lofty position as an industry dominator and stock market phenomenon to just another contender.
