Tesla stops selling self-driving technology as a one-off, pivoting to a subscription model amid slowing vehicle sales

“Tesla will stop selling FSD after Feb 14,” CEO Elon Musk announced in the wee hours of Wednesday morning. “FSD will only be available as a monthly subscription thereafter.”

The stock initially jumped on the news before sliding lower in early trading on Wednesday. The mixed reaction mirrors the announcement itself, which can be read in at least two very different ways, depending on how generous you want to be to Tesla and its Full Self-Driving technology.

The generous take: As FSD nears the ability for Teslas to actually drive themselves without human intervention, its value is going to skyrocket. Tesla will be able to charge much more per month as part of a handsome, high-margin recurring revenue stream, so it will no longer make sense for Tesla to sell one-off lifetime packages.

“The FSD price will continue to rise as the software gets closer to full self-driving capability with regulatory approval,” Musk said in 2020. At “that point, the value of FSD is probably somewhere in excess of $100,000.”

At current rates, Tesla owners can buy FSD for around $8,000 or pay $99 per month — quite a steal by Musk’s estimation.

Of course, from most accounts Tesla’s tech is not actually at the level of full self-driving. Take, for example, Tesla Robotaxis, which run a more advanced version of consumer FSD, but have missed the company’s own deadline to remove safety drivers from the front seats. In Austin, the fleet of roughly 30 Robotaxis has been involved in eight crashes since June, according to data from the National Highway Traffic Safety Administration.

The less generous take: Very few people were ever willing to shell out for FSD, and those who did were often left frustrated as Tesla repeatedly pushed the promise of true autonomous driving further into the future. That frustration is especially acute for owners of older Teslas, which may require hardware upgrades to run the latest versions of FSD.

So far only 12% of existing drivers pay for FSD — either through the one-off purchase or a subscription — the company reported in October. And Tesla already slashed the purchase price to $8,000 from $12,000 back in 2024, and halved the monthly subscription rate to $99 from $199. Note that in the 2020 quote, Musk is essentially admitting that Full Self-Driving doesn’t mean “full self-driving.”

In the past few years, Tesla’s revenue growth has largely come from energy generation and services, which includes FSD. In the third quarter of 2024, services revenue rose 25%, while automotive sales grew just 8% — and that was during a record delivery and revenue quarter. With fourth-quarter deliveries disappointing, those automotive numbers are likely to look even worse when Tesla reports earnings later this month, making predictable, high-margin subscription revenue all the more attractive.