Tesla Side Bets

I want to focus on one of Tesla's side bets which often gets overlooked. FSD (Full Self Driving) is an incredibly exciting service and is already making money for Tesla. In the last quarter the company sold $300 million worth of Beta FSD software to existing Tesla clients.

This could be huge if they can get it right. Most Tesla models already on the road have self driving capabilities. The drivers just need to buy the software. Here is a quote from Elon Musk during the earnings call.

"So that's actually a tremendous upside potential because all of those cars, with a few exceptions, only a small percentage of cars don't have Hardware 3, so that means that there are millions of cars where full self-driving can be sold at essentially 100% gross margin. And the value of it grows as the autonomous capability grows. And then, when it becomes fully autonomous, that is a value increase in the fleet. That might be the biggest asset value increase of anything in history. Yes."

The big question of course is can they get it right? Take a look at the graph below which shows the cumulative miles driven in FSD beta (around 400 000 vehicles). That is nearly 100 million miles of learning power. As with all things AI, the more real-life learning opportunities there are, the better. If anyone is going to crack this challenge, I believe it will be Tesla first.