Loup Ventures Managing Partner Gene Munster offered his take on what this means for the company.
FSD Can Move The Financial Needle: The subscription option can accelerate FSD adoption, given the cost shifts from $10,000 upfront to $200 per month, or $99 for cars that already have advanced Autopilot, Munster said in the note.
This, according to the analyst, is an important step along the long-term path to increasing margins, which will strengthen the company's operating model.
"Improving profitability is central for mainstream tech investors to endorse Tesla as a true tech company," Munster wrote in the note.
The analyst expects retention of FSD will build as Tesla adds capabilities, although he sees more cancellations initially.
"The good news for Tesla is that between now and 2031, FSD subscription can move the financial needle for the company," Munster said.
FSD Will Live Up to Its Name Over Time: FSD, according to the analyst, is currently far from full self-driving, and falls short of its name. Over time, the analyst expects it to deliver level 4 or 5 autonomy.
FSD currently works on highways and parking lots, given it key features such as navigate on autopilot, auto lane change, autopark, summon, and traffic light and stop sign control, the analyst said.
Tesla opted to go with the name FSD, as eventually the product will be fully autonomous as new features are added, including autosteer on city streets, later this year, he added.
FSD's Impact On Profits & Valuation: Booked operating profit from FSD upfront and subscriptions will increase from $600 million in 2021 to $102 billion in 2032, Munster said. This, according to the analyst, is based on the presumption that about 80% of Teslas on the road will have FSD by 2031. Operating margin is expected to increase from 42% in 2021 to 64% in a decade, he added.
FSD alone will be worth $850 billion for Tesla in a decade compared to the company's current market-cap of $620 billion, Munster said.
Tesla shares closed Friday's session at $643.38, down 0.91%.
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