Jul 26, 2019

Tesla expects windfall from self-driving tech rollout

Illustration: Sarah Grillo/Axios

Elon Musk predicts full self-driving features — which Tesla is now selling as a $6,000 option on its electric vehicles but aren't yet available — will transform the company's bottom line.

The big picture: Right now, Tesla's Autopilot has only limited self-driving capabilities on highways. When Tesla can offer a fully self-driving car, Musk said this week in Tesla's Q2 earnings call, profit margins will soar to as much as 30% (from today's 19%). Revenue that had been deferred will be recognized, but more importantly, Musk expects orders for the full self-driving package to increase significantly.

"The gross margin over time will be really quite compelling when factoring in the full self-driving option."
— Elon Musk

Between the lines: Tesla had about $1 billion of deferred revenue on its balance sheet as of March 31, for "unsatisfied performance obligations."

  • Deferred revenue is common in businesses where customers prepay for a subscription or service, for example.
  • In Tesla's case, these aren't just self-driving features that have yet to be activated but certain other services, including access to Tesla's Supercharger network and internet connectivity.
  • Of the $1 billion in deferred revenue, Tesla expects to recognize $462.3 million in the next 12 months — a sign that it intends to add some of the promised features. The remainder will be counted over time, up to the 8-year life of the vehicle.

Tesla's timetable for driverless cars is far more ambitious than the rest of the industry.

  • While most carmakers say fully automated vehicles are still a decade away, Musk says Tesla will have a million robotaxis on the road by next year.
  • Tesla timetables have proven unreliable, however, and the company is still working on two promised features — traffic signal recognition and automated city driving — in the "full self-driving" package.
  • Since Tesla says it will keep improving the technology — and raise prices accordingly — the package description could also change.

What to watch: Tesla, which had said it expected to return to profitability in the third quarter, has changed its outlook slightly.

  • The company now says instead of "expecting" a profit, it is "aiming" for one but adds its main focus will be boosting deliveries, expanding factory production and generating cash.

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Editor's note: This story has been corrected from a previous version that stated erroneously that Tesla did not have access to the money it is collecting for fully self-driving features.

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Updated 2 hours ago - Politics & Policy

U.S. coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Andrew Witherspoon/Axios. This graphic includes "probable deaths" that New York City began reporting on April 14.

The CDC is warning of potentially "aggressive rodent behavior" amid a rise in reports of rat activity in several areas, as the animals search further for food while Americans stay home more during the coronavirus pandemic.

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World coronavirus updates

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Japan's economy minister outlined plans on Monday to end the nationwide state of emergency as the number of new novel coronavirus cases continues to decline to fewer than 50 a day, per Bloomberg. Japan has reported 16,550 cases and 820 deaths.

By the numbers: Over 5.4 million people have tested positive for the virus as of Monday, and more than 2.1 million have recovered. The U.S. has reported the most cases in the world (over 1.6 million from 13.7 million tests). The U.K. is reporting over 36,800 deaths from the coronavirus — the most fatalities outside the U.S.