While Tesla Talks, Waymo Drives

Core Insights - Tesla has established itself as a leader in autonomous driving with its Full Self-Driving (FSD) software, which automates certain driving tasks but still requires driver supervision [2] - Despite high expectations, FSD does not significantly contribute to Tesla's revenues, especially as competition in the EV market increases [2] - The subscription model for FSD is gaining traction, with estimates suggesting that around 10% of new Tesla buyers may opt for it, potentially generating approximately $550 million in annual revenue [3][4] FSD Revenue and Market Position - Tesla offers FSD for a one-time fee of $8,000 or a subscription at $99 per month, with the subscription likely being the preferred choice for new buyers [3] - By the end of 2025, cumulative FSD subscriptions could reach around 460,000, translating to an estimated $550 million in annual revenue, which is a small fraction of Tesla's total sales [4] - The valuation premium of Tesla's stock is not fully justified by the current FSD revenue, indicating a potential disconnect between market expectations and actual performance [4] Competitive Landscape - Elon Musk has made ambitious claims about FSD advancements, but the actual improvements have fallen short, with the latest version showing only a 2.5 times increase in miles driven between disengagements [5] - In contrast, Waymo has made significant progress, conducting over 250,000 fully autonomous rides weekly, showcasing a more advanced level of autonomy compared to Tesla's FSD [6][7] - Waymo's vehicles operate without human oversight and have demonstrated a 78% reduction in injury-causing crashes compared to human drivers, highlighting its competitive edge in safety and user preference [7] Tesla's Potential Advantages - Tesla's reliance on a camera-only system powered by neural networks may offer a simpler and more cost-effective approach to scaling its FSD technology compared to Waymo's complex hardware requirements [8] - With over 5 million Teslas on the road, a significant portion may be equipped to run FSD software, providing a large potential user base for future advancements [8]