Tesla's latest self-driving push? A price cut on its FSD software.

By Emily Bary

Tesla's stock inches higher after Elon Musk amplifies the announcement on X

Tesla Inc.'s Full Self Driving (FSD) software is the "crux" of the bull case for the company's stock, an analyst wrote earlier this week. And now the company has just made a move that could get more drivers to try it out.

The electric-vehicle maker has lowered the price of its supervised FSD software to $99 a month from $199 a month previously - a decision that could grow the number of miles driven through the feature, which is an advanced driver-assistance system (ADAS) meant for driving in cities.

See also: Tesla's 'self-inflicted' woes make this analyst feel more cautious about the stock

The company announced the move on X, formerly known as Twitter, and Chief Executive Elon Musk amplified it from his own account. Tesla shares (TSLA) were up nearly 1% in after-hours trading Friday.

FSD is the "crux" of the Tesla thesis, Piper Sandler analyst Alexander Potter said in a Tuesday note to clients, prior to the announced price cut. "Even when Tesla's vehicle backlog was bursting at the seams, we think it was still impossible to own TSLA without assigning significant value to FSD software," he said.

If Tesla is able to "clear the technical, psychological and regulatory hurdles associated with autonomous vehicles," Potter thinks that "significant value will eventually be unlocked." He has an overweight rating and a $205 target price on Tesla shares, writing that perhaps over half of that target relates to FSD.

The company also has an option for people to pay upfront for FSD capabilities when they buy a Tesla. That option costs $12,000.

Tesla already recently changed course on the software, directing employees to give customers a short test drive that would show off its cars' FSD capabilities. That decision in March was seen as an attempt by Tesla to amass more FSD subscriptions and also help pacify regulators who are looking into the technology.

Autonomous driving is setting up to be an even bigger part of the Tesla narrative as the company prepares for an August event where it will "unveil" its robotaxi. The company has long envisioned a world in which there are fleets of autonomous Tesla cars that shuttle people around and that can be summoned through an app.

But Wall Street remains skeptical about Tesla's ability to deliver on that vision, and unsure whether robotaxis are the right focus for Tesla now, as the company contends with slowing demand and growing competition in its core business.

Opinion: Why Elon Musk's latest Tesla robotaxi promise is unlikely to deliver

"Unveiling a robotaxi on August 8 may help sentiment but not address the timeframe and investment needed to render the technology and business model viable," Jefferies analyst Philippe Houchois wrote earlier in the week.

-Emily Bary

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04-12-24 1756ET

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