Tesla has cut the price of its Full Self-Driving (FSD) software by $3,000, to $12K, down from $15K in the US.
North America might not have gotten an official Model 3 refresh announcement yet like Europe did, but it did get something Europe didn’t get overnight – a big drop in the price of FSD.
Almost exactly a year ago, Tesla raised the price of its FSD package from $12K to $15K alongside the release of FSD Beta 10.69, which added some significant improvements to the software’s capabilities. The theory was that as FSD gets better, it gets more valuable, and thus the price should go up as well.
But now, Tesla’s configurator lists the cost of FSD in the US as $12,000 again, a 20% price cut from yesterday’s price for the same software. The change applies to all Tesla models in the US, with a similar price drop in Canada (from $19.5K to $16K CAD).
As was the case during the last price change, FSD’s subscription pricing remains unchanged at $199/month (but if you want to subscribe with a car bought between late 2016 and mid 2019, Tesla will still charge you $1,000 for hardware you already bought).
The price drop hasn’t been echoed in all other territories. It’s still listed at £6,800 in the UK and 59,600kr in Norway, same as it was before today’s price drop. That said, FSD remains significantly cheaper in Europe than the US after taking into account exchange rates – though it also has more capabilities in the US than in other countries.
Tesla has been on a bit of a tear when it comes to price drops this year, massively slashing prices of vehicles multiple times this year, and then gaining access to the full IRA tax credit on its cheapest Model 3, making the car quite a deal. This has made some recent customers angry at the sudden drops in residual value for their vehicles, but has overall benefitted the consumer, as lower prices are generally a good thing.
City Dwellers’s Take
The most interesting part about this change is that Tesla has often said that the value of FSD is directly related to its capabilities. As the system becomes more capable, it becomes more valuable, which means Tesla should be able to charge a higher price for it.
Tesla CEO Elon Musk has even gone as far as to say that this means Tesla cars with FSD are “appreciating assets,” potentially worth $100-200k due to their value as robotaxis. Though Tesla only uses those values when it’s convenient, considering FSD much less valuable when offering trade-in estimates to owners.
So if the price goes up as the system gets better, then when the price goes down, does that mean the system has gotten worse? And is it even worth it, at either price? (Personally, I rarely use it, and would rather drive myself instead of having to manage and be surprised by the car’s weird decisions, trying to run lights or jump me off of speedbumps)
But on a more practical business level, this move to lower FSD prices probably has little to do with the system’s capabilities and is moreso a way to boost financials as the quarter winds down at the end of this month. A lower price could incentivize owners to pony up for software which has otherwise mostly gone up in price, not down (though it has had some price dips before, for similar cash/demand-generation reasons). This could give Tesla a cash infusion if it feel like it needs one.
Tesla has already rolled out some efforts to boost demand this quarter. The largest (and most craven) one is Tesla’s FSD transfer scheme, allowing owners of FSD to do a one-time transfer of FSD capability from their old vehicle to a new one. This scheme expires on the last day of the quarter, which suggests it is less about goodwill and doing the right thing for customers who years ago purchased expensive and still-subpar software, and more about boosting quarterly demand.
But we also don’t know how long this will last. Maybe it lasts for a year, like the last price change did, or maybe it changes at the end of this quarter. But don’t jump too fast – while today’s price drop was sudden, Tesla has usually telegraphed FSD price increases recently, tying them with big software releases, so you probably won’t get surprised by a sudden price hike if they do decide to raise them again.
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