Tesla is closing the door on a long-standing sales tactic for its most controversial software feature, Full Self-Driving (FSD). Starting next month, buyers will no longer be able to purchase it outright, but will need to chose a monthly subscription. CEO Elon Musk, who pitched FSD as one of the company’s major income assets, confirmed the change.
The shift ends more than a decade of selling FSD as a high-priced add-on in the US. It was marketed as an early buy-in to a fully autonomous future, and the package cost as little as $5,000 in its early years. But that price rose to $15,000 in 2022, then fell again to $8,000 last year. The subscription costs $99 per month.
FSD remains a Level 2 driver-assistance system that requires constant human supervision. Drivers must keep their hands ready on the wheel and remain alert at all times. Despite the branding, the software does not allow Tesla vehicles to operate independently.
Not yet in Europe
Tesla is not allowed the same degree of autonomous driving in Europe, where rules are much stricter. In Belgium, Full Self-Driving (€7,500) only entails traffic light and traffic sign recognition, whereas Autopilot (€3,800) includes lane-keeping and adaptive cruise control, with a promise of extended functionality at a later stage. That could be soon, however.
The company has pending approval to start operating the American version of FSD in the Netherlands, with a verdict expected next month. This appeal can be considered a gateway to launching in the rest of Europe. It seems only logical that the subscription model also arrives in Europe.
During the company’s earnings call from last October, it was made clear that only about 12 percent of the active Tesla fleet had paid for FSD in the US. At that adoption rate, the economics of the upfront purchase had become harder to justify. Clearly, Tesla hopes that the subscription scheme will boost adoption as the price tag is more accessible.
Pushing customers toward subscriptions could generate a short-term bump in cash flow, while it offers more drivers a chance to give it a go and proceed with it month by month, or abandon the feature altogether if they dislike it.
Robotaxi capability
FSD has also long been framed as an asset tied to the vehicle that can unlock future revenue for the owner. Buyers were encouraged to pay early on the premise that the software would eventually be upgraded to robotaxi capability, which would dramatically increase a car’s value.
But that outcome has yet to materialize. Ending upfront sales limits the number of customers who can argue they paid in advance for functionality that has not arrived.
Of course, Tesla doesn’t take a solitary stand with a subscription-based model. Industrywide, these have become the preferred model for advanced driver-assistance features, offering automakers steadier revenue and lower barriers for customers. In the US, Ford and General Motors already rely on monthly fees for hands-free driving systems. Rivals, including Rivian, are introducing competing features at far lower prices.
A new name?
Legal pressure appears to be another factor. Tesla faces ongoing scrutiny in California over how it markets its automated driving systems. In December, the state’s Department of Motor Vehicles (DMV) accused the company of misleading advertising and ordered solutions related to the product’s name. Several consumer lawsuits tied to autonomy claims remain active.
Probably, the new approach also mirrors how Tesla’s broader autonomy strategy lags behind dedicated robotaxi operators. Alphabet unit Waymo now logs hundreds of thousands of paid driverless rides each week across multiple US cities.
While Volkswagen, Mercedes, and Uber have reignited their interest in robotaxis, as AI-based models leverage the technology’s development. Tesla’s own ride-hailing pilots in Austin and San Francisco still rely on human drivers or safety supervisors.
