Tesla and rivals chase subscription revenue from driver software

In short: Carmakers, led by Tesla, are trying to make more money from paid software subscriptions for driving features, not just from selling cars.

What's going on

Tesla is putting more focus on software and AI services as a new profit source. The idea is simple, sell the car once, then earn ongoing monthly fees for features. It is like buying a TV and then paying for extra channels every month.

A key product for Tesla is Full Self-Driving, or FSD. Despite the name, Tesla says its current “supervised” version still requires a human driver to stay alert and keep control. In the US, FSD can cost $99 a month, although pricing varies by country.

Tesla said more than 75 percent of new Teslas sold in North America now include its supervised FSD option. It also said it has 1.7 million active FSD subscriptions worldwide, up 67 percent from a year ago. Tesla does not publicly break out how much recurring revenue FSD brings in.

This shift is not just about Tesla. Other car companies are also trying to add software and subscription income, especially as electric cars become more similar in range and price. Chinese carmakers, including BYD and Xpeng, are competing hard and also investing in self-driving technology.

What to watch

The biggest question is approval from regulators. Tesla has not received approval for a fully autonomous version of FSD, meaning a version that can drive without a human paying attention. Tesla and China’s Xpeng are both working to get wider approval in Europe, where rules and votes by member states can slow down rollouts.

Source: Arstechnica