The bank has noted that Tesla’s Full Self-Driving (FSD) has the potential to significantly boost the electric vehicle maker’s earnings in China. This could amount to $2.3 billion by 2030, provided that the FSD sees increased adoption among the company’s customers in the country. The potential for this boost was suggested in Tesla’s partnership with internet giant Baidu for navigation and mapping data. Additionally, the China Association of Automobile Manufacturers confirmed that Tesla has met the data security and processing requirements in China.
So far, the advanced features of FSD (Supervised) have only been released in the United States and Canada, limiting their availability to consumers in those two countries. Bank of America has suggested that if Tesla releases FSD as a $99 service in China, and a quarter of the estimated 1.6 million Tesla drivers in the country subscribe to FSD, it could generate half a billion in annual revenue with a gross margin likely to exceed 70%. According to Bank of America, the earnings benefit could be approximately $350 million, with the potential to increase significantly over time and reach $2.3 billion in annual earnings by 2030, based on certain assumptions and projections for Tesla’s China auto sales. However, it was also noted that FSD may not generate any earnings in China if Tesla faces pressure to release the system at no cost to consumers, potentially for competitive reasons.
Nevertheless, even in a scenario where there are no earnings from FSD, Bank of America pointed out that Tesla would still benefit from China’s FSD users, as they could potentially accelerate the system’s neural network training. Furthermore, it was noted that FSD could help Tesla catch up to and potentially surpass other electric vehicle offerings on the market, especially in the face of increasing competition from domestic manufacturers. Combined with recent price cuts in China, this could drive volume growth for Tesla in the country. It is clear that the potential of FSD in China presents both opportunities and challenges for Tesla, and the company’s approach to pricing and adoption in the market will likely have a significant impact on its earnings and market position in the coming years.