While many investors have been skeptical about Tesla (TSLA) Lately, a recent move may be the first step in recovering the reputation of the electric vehicle company.
A controversial topic within the world of Tesla is fully self-driving (FSD), which CEO Elon Musk has promised will change the world.
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But the technology has not yet kept Musk's word: in December 2023, two million Teslas were recalled due to problems with the FSD. Before the recall, nearly 1,000 accidents were recorded using FSD.
On March 26, Tesla announced that it would give a free month of FSD to all Tesla buyers. It also said it now requires mandatory software installation and activation and a test drive to display it on all vehicles.
“Almost no one realizes how well (supervised) FSD works,” Musk wrote in the memo. “I know this will slow down the delivery process, but it is still a strict requirement.”
Tesla shares rose 5% after the announcement, prompting Deep Water analyst Gene Munster to share some thoughts on what he thinks this move could mean.
“Yet another fact that while traditional automotive is moving away from electrification and autonomy, Elon is doubling down,” Munster wrote. “Today's news is the latest proof of his conviction that we are getting closer to autonomy.”
Actions of $TSLA rose 5% (vs. Nasdaq rose 0.4%) on the news that all new Teslas come with 1 month of free FSD.
Another fact is that, although traditional automotive is moving away from electrification and autonomy, Elon is doubling down. Today's news is the latest evidence…
—Gene Munster (@munster_gene) March 26, 2024
Munster went on to say that only about 5% of Tesla buyers purchase or subscribe to FSD.
“If that figure reaches 20% in 2026, the 15% incremental subscribers would add about $1.1 billion to revenue and about $1 billion to net income,” he continued. “The ballpark numbers are that increased adoption would add about 8% to net revenue in 2026. Given the waterfall nature of the subscription business, that benefit would compound going forward. In 2027, the benefit to net revenue would be “around 15% and 21% in 2028.”
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