Leading Analyst Explains Why Tesla’s Latest Strategy Could Make Billions

Leading Analyst Explains Why Tesla’s Latest Strategy Could Make Billions

Tesla just made a move that could add big money to its bottom line.

While many investors have been feeling skeptical about Tesla  (TSLA)  lately, a recent move may be the first step in recovering the EV company’s reputation.

One controversial topic within Tesla’s world is full-self driving (FSD), which CEO Elon Musk has promised will change the world.

But the technology hasn’t quite lived up to Musk’s word yet, with two million Tesla recalled in December 2023 because of FSD problems. Leading up to the recall, close to 1,000 crashes were recorded using FSD.

On March 26, Tesla announced that it would grant a free month of FSD to all Tesla buyers. It also said it now requires a mandatory install and activation of the software and a test drive showing it off on all vehicles.

“Almost no one actually realizes how well (supervised) FSD works,” Musk wrote in the memo. “I know this will slow down the delivery process, but it is nonetheless a hard requirement.”

Tesla stock jumped by 5% after the announcement, leading Deep Water analyst Gene Munster to share some thoughts on what he believes this move could mean.

“Yet another datapoint that while traditional automotive is backing away from electrification and autonomy, Elon is doubling down,” Munster wrote. “The news today is the latest evidence in his conviction that we’re getting closer to autonomy.”

Munster went on to say that only about 5% of Tesla buyers either purchase or subscribe to FSD.

“If that number goes to 20% in 2026, the incremental 15% of subscribers would add about $1.1B to revenue and close to $1B to net income,” he continued. “Rough numbers are the increased adoption would add about 8% to net income in 2026. Given the waterfall nature of the subscription business, that benefit would compound going forward. In 2027, the benefit to net income would be around 15% and 21% in 2028.”

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