Overall, Tesla’s Q2 Earnings Call was very positive for the company: It made a healthy quarterly profit of $1.1 billion, and a big chunk of that money came from actually selling cars, not regulatory credits. That’s great! Some of that money also came from people dropping $10,000 (or, by subscribing for $99 or $199 a month) for Tesla’s Full Self-Driving system, which is currently in a beta stage of development. During this call Tesla CEO Elon Musk brought up an interesting question about when and if those customers’ money will have been well-spent.
Here’s a transcript of the call, at the bit I want to talk about:
Elon Musk: (57:45)
Yeah. It’s like any given the price is going to be wrong. So we’ll just adjust it over time, as we see if the value proposition makes sense to people. I’m not thinking about this a lot right now. We need to make full self-driving work in order for it to be a compelling value proposition.
Tesla has been selling this service for years now, and Elon is saying that for it to be a “compelling value,” the company will “need to make full self-driving work.”
That sure sounds like he’s saying that anyone who has already paid for FSD both does not yet have a system that works, and their purchase was not a “compelling value.”
Am I reading that right? So … what about all the people that already paid for it? Elon addresses them next:
Elon Musk: (58:07)
Otherwise people are kind of … Depending on the future. Like right now, if it doesn’t make sense for somebody to do FSD subscription, I think it’s debatable. But once we have full self-driving widely deployed, then the value proposition will be clear. And at that point, I think basically everyone will go use it. Or a rare individual who doesn’t.
That’s kind of a confusing paragraph, there. I mean, I guess you really will be “depending on the future” if you dropped ten large for something that you’re hoping will be done in the future, right?
And where he says “if it doesn’t make sense for somebody to do FSD subscription, I think it’s debatable,” what, exactly does that mean? That it might not make sense for someone to do an FSD subscription, because paying for something that isn’t finished and doesn’t do the things it’s promised to do might be, debatably, a bad idea?
As far as what was promised to people who have spent money on FSD, remember that Elon promised in 2019 that Teslas could be completely self-driving robotaxis by 2020, earning their owners bags and bags of cash. (This promise led to one of the greatest acts of mental gymnastics on r/TeslaMotors.)
It’s not like Elon was even really that cagey with this claim, and he was clear it will apply to existing Tesla vehicles with the FSD option. Remember, he said this in 2019:
“From our standpoint, if you fast forward a year, maybe a year and three months, but next year for sure, we’ll have over a million robotaxis on the road. The fleet wakes up with an over the air update; that’s all it takes.”
That seems like the sort of thing that might convince someone to drop a lot of money on a feature for a car, even if that feature may not be complete just yet, because the guy in charge is flat-out telling you when you’ll have it, and what it will do.
The problem is, of course, that didn’t happen. And, based on the current pace of development, it doesn’t really seem like it’s going to happen any time soon. According to Elon’s quote in this earning call, though, it’s “once we have full self-driving widely deployed, then the value proposition will be clear,” a statement that really suggests that before this point, that “value proposition” isn’t clear at all.
What should we make of this? It’s not exactly a shocking admission that FSD isn’t ready yet, because we all know that, it’s called a beta release and it in no way can drive cars on its own. It’s certainly not earning cash for its owners robotaxi-style.
What is a new statement to hear is this tentative, sort-of admission that until it actually is finished (I’m being generous and not trying to stick an “if” in there), maybe it doesn’t make any sense, from the consumer’s standpoint, to pay good money for it.
Of course, cars are irrational purchases, fundamentally, and if someone just wants to drop $10,000 or $200 a month for unfinished software that doesn’t do everything it was hyped up about just yet and let that unfinished software take control of your expensive car with your soft, pliant body in it on pubic roads, then, well, I guess that’s just one of those irrational car decisions people make.
I mean, almost 6,000 people bought Nissan Murano CrossCabs between 2011 and 2013, too.
I’m not sure I’d go so far as to suggest that what Tesla has been doing has been a scam, as some respected voices in the space have hinted, because I’m not convinced it was conceived with an intent to deceive, and maybe this whole mess is more the result of some (really kind of shocking) naiveté about the scope of the Full Self-Driving problem.
Whatever the initial motivations were, the result is pretty clear: Not even Elon himself seems certain about the future of FSD, and he seems even less certain that it’s worth paying for until it’s actually finished, whenever and however that may be.