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Tesla’s Self-Driving Technology: A Golden Goose Worth $20 Billion Annually?

Tesla’s groundbreaking “Full Self-Driving” (FSD) feature has been a game-changer in the world of automotives, a testament to the innovative capabilities of the pioneering electric vehicle company. The feature, according to Gene Munster of Deepwater Asset Management, could supercharge Tesla’s revenue by a staggering $20 billion annually.

During Tesla’s Q2 earnings call, CEO Elon Musk made a noteworthy announcement, hinting at a significant future direction for the company. Tesla was exploring the potential to license its proprietary Full Self-Driving software to a major manufacturer. Such a move, if it materializes, could be a boon for Tesla, offering a shortcut for competitors eager to gain a foothold in the autonomous driving market without the extensive research and development expenses.

Munster underscored the immense financial possibilities of such a licensing strategy in a recent statement. “The financial potential of licensing FSD is significant,” he commented.

Currently, Tesla offers its customers the option to enhance their vehicles from Basic Autopilot to the Full Self-Driving package for a monthly fee of $199. However, if Tesla reduces this price to $100 a month and licenses the software to a quarter of new cars and light trucks entering the market, the revenue surge could be astronomical. According to Munster’s estimations, such a strategy could ramp up the company’s revenue by roughly $4 billion.

Fast forward five years, and Munster suggests this figure could multiply fivefold to an additional $20 billion in annual revenue. The ten-year forecast looks even more promising, projecting that Tesla could net a whopping $100 billion in operating income. With these projections, FSD licensing could potentially contribute an extra 20% to operating profits.

“While these targets are many years away, it illustrates the FSD licensing opportunity is meaningful and worth the wait,” emphasized Munster.

In contrast, Tesla’s stock experienced an 8% dip recently as investors took time to digest the company’s Q2 financial performance, which reflected reduced profit margins. This was due, in large part, to aggressive price cuts on its flagship car models over the past year.

However, Munster remains optimistic about the future profitability of Tesla, forecasting an upward trend for the company’s margins over the coming years. He predicts that Tesla will achieve a 20% gross margin by the end of 2024. With Tesla’s Full Self-Driving feature and the potential of licensing the technology, the road ahead seems paved with golden opportunities.