Tesla's narrative as an AI company has been repeatedly heard by investors, but Musk is still persevering. Now, the CEO expects to demonstrate Tesla's value again by pushing the FSD (Fully Automatic Driving) system.
Musk recently announced that all Tesla models equipped with FSD system in the United States will have a one month free trial of this feature, and requires vehicles in North America to install and activate FSD V12.3.1 version. Employees need to take customers on a short test drive to experience FSD before delivery.
He posted, "Almost no one realizes how good the actual effect of FSD is, although doing so would delay the delivery process, it is a mandatory requirement." As soon as the news came out, Tesla's stock price closed up 3% on the same day.
As the latest version of Tesla's large-scale push to the United States, FSD Beta V12 is the industry's first end-to-end model solution to be implemented. Compared to the previous generation system, end-to-end neural network technology can achieve direct sensor to vehicle control, enhance the system's ability to generalize understanding of the scene, and be closer to the driving state of humans. Musk once stated that the safety of the future Beta version will be 10 times higher than that of human drivers.
Tesla is not a traditional car manufacturer, it is also involved in the AI industry. The chips used in the FSD system are independently developed by Tesla, and the data training is entrusted to the Dojo supercomputer developed by Tesla. The platform's performance ranks first in the world.
The current full set price of FSD is $15000, and monthly subscription is also available. This expensive autonomous driving service is expected to bring Tesla $20 billion in annual revenue in the future.
However, the current reality is that Tesla's past worldwide sales have little to do with the auto drive system. The highest FSD loading rate in the world has just exceeded 14% in North America, and the system has not yet been opened in China, the world's largest new energy vehicle market.
The revenue contributed by FSD is negligible in Tesla's overall revenue, and coupled with the huge R&D investment in the Dojo supercomputing platform on which the algorithm relies, Tesla's intelligent driving business has not yet reached a profitable stage.
Currently, Tesla, like other car companies, is still winning the market through automotive products themselves, relying on large-scale manufacturing and updated production processes to amortize costs and increase profits.
However, Tesla has not given up on making investors pay for the exciting story of autonomous driving. Last year, Tesla's stock price reached a historic high of $300 from $100 at the beginning of the year, and AI stories including FSD, brain computer interfaces, humanoid robots, etc. contributed to Tesla's market valuation.
However, since the beginning of this year, Tesla's stock price has fallen to the lowest among the seven giants in the US stock market, and investors have begun to feel tired of the AI story and worried about the prospects of its car making business.
Several financial institutions have lowered Tesla's target prices this month, citing that its price reduction strategy is gradually weakening its boost to sales, and the slowdown in demand for electric vehicles will continue. Wells Fargo Bank has lowered Tesla's target price from $200 to $125, which is currently the lowest price offered by Wall Street.
Tesla's 2023 financial report shows that with the completion of product upgrades for the Model 3 and the recovery of production capacity at the Shanghai super factory, the overall gross profit margin for the fourth quarter of last year was only 17.6%, and the key automotive gross profit margin was only 16.6%, which was lower than the previous quarter and lower than market expectations. The annual revenue was 96.77 billion US dollars, a significant decrease of 19% year-on-year growth compared to the previous two years (over 50%).
Musk warned investors that Tesla's sales growth will significantly slow down in 2024. After the first batch of electric vehicle enthusiasts tried it out, the general public consumers were unwilling to pay for the high prices of electric vehicles, and electric vehicles have shown a trend of slowing down growth in Europe and America.
Despite the booming trend of electric vehicles in the Chinese market, Tesla is facing severe price competition and a slowdown in growth rate. According to data from the China Association of Automobile Manufacturers, Tesla's wholesale sales in February were 60400 vehicles, a decrease of over 15% compared to the same period last month.
In order to balance supply and demand, the latest market news shows that Tesla's Shanghai factory has reduced production, and employees have adjusted their weekly working hours from the original six and a half days to five days, which may last until April.
For Tesla, which has been without new actions, autonomous driving, and delayed launch of third-generation electric vehicle platforms on the "S3XY" series models for too long, the latest version of FSD can indeed stimulate the market at this time. After all, the cost advantage accumulated in the manufacturing end is easily caught up with after the large-scale popularization of electric vehicles, and autonomous driving is still full of some imagination at least for now.
The development speed of intelligent driving is faster than expected, and many companies in the domestic market have already laid out urban NOA. Huawei and Xiaopeng plan to complete large-scale opening up nationwide by the end of this year. Not long ago, Xiaopeng and DJI Car successively announced that they will downgrade their advanced intelligent driving to 100000 to 150000 models.
The driving experience of the new version of FSD may be a strong selling point for Tesla, but the story no longer satisfies the market. This year, people are more concerned about its landing speed and loading rate.