Elon Musk’s Bold Move: Mandatory Full Self-Driving Demos Before Tesla Delivery

Key Takeaways

  • Elon Musk mandates Tesla customers in North America to experience a Full Self-Driving demo before taking delivery.
  • Tesla's decision reflects confidence in its technology despite potential delivery delays.
  • Analyst predicts flat delivery numbers for Tesla in 2024 amidst increasing competition and market challenges.

Elon Musk, Tesla’s CEO, has made news again by setting a new rule for how Tesla cars are delivered in North America (NA).

Elon Musk has decided that before a customer can take their new Tesla home, they must first see a demonstration of Tesla’s advanced driver assistance system, Full Self-Driving (FSD).

This decision shows Tesla’s strong belief in its technology and its commitment to making sure customers fully understand and value it despite the potential for slowing down the delivery process.

Elon Musk’s directive requires employees not only to install and activate the latest FSD software, version V12.3.1, but also to take customers on a brief test drive to demonstrate what FSD can do. Elon Musk believes that most people do not realize how effective FSD is under supervision.

This directive was sent to employees via email, as reported by Bloomberg.

While all Tesla cars come with a basic driver assistance system called Autopilot, FSD offers a more enhanced driving experience for an additional monthly fee – $199 for most customers in NA. However, it’s important to note that FSD does not make the cars fully autonomous; drivers need to stay alert and ready to take control at any moment.

Musk has also announced a one-month FSD trial for all compatible cars in the U.S.

Tesla is now inviting owners to participate in the FSD Beta program, which lets them try out new features on public roads, helping Tesla improve the system. This move comes as Tesla addresses safety concerns from the National Highway Traffic Safety Administration by making voluntary updates to its Autopilot and FSD systems.

The Strategic Shift in Tesla’s Delivery and Growth Model

This change is happening at a time when Tesla is working hard to prevent a drop in its delivery numbers compared to last year. Tesla has even been encouraging its staff to assist with car deliveries, primarily as the end of the quarter draws near. A message to the employees emphasizes the importance of extra support to ensure customers receive their cars promptly.

In 2023, Tesla overcame these challenges impressively, delivering over 484,000 vehicles in the last quarter alone and reaching a total of 1.81 million deliveries for the year. This marks a significant 38% increase in deliveries from the year before.

As of 2023, Tesla remained at the forefront of the U.S. electric vehicle (EV) market, with its Model Y and Model 3 vehicles leading in sales. Notably, the Model Y made up 33% of all U.S. EV sales in 2023, demonstrating Tesla’s dominant market position.

However, Tesla is facing hurdles, including its aging vehicle lineup and stiff competition from established car manufacturers and new EV market entrants. The growing competition in the EV market is raising concerns among analysts about Tesla’s ability to continue its rapid growth amidst decreasing demand and increased competition.

This situation is reflected in Tesla’s stock value, which has significantly dropped.

Tesla shares
Tesla shares price | Source: Google Finance

Analyst Colin Langan from Wells Fargo has also downgraded Tesla’s rating, suggesting that Tesla is now a “growth company with no growth.” He argues that recent price cuts meant to boost sales have not led to the expected increase in sales volumes.

Langan expects Tesla’s delivery numbers for 2024 to remain flat, in stark contrast to the record 1.81 million vehicles delivered in 2023. His projections for Tesla’s earnings in 2024 and 2025 are now 32% and 52% below what Wall Street had anticipated, respectively.

Despite Tesla cutting prices by about 5% in the second half of 2023, sales volumes only saw a minor 3% increase compared to the first half of the year, suggesting a possible saturation in the market and reduced effectiveness of price reductions.

These challenges highlight a critical reality: Tesla’s ambitious growth targets, including CEO Elon Musk’s forecast of over 50% annual sales growth, are being severely tested by increasing competition and shifting market conditions.

Currently, Tesla’s stock is trading at 58 times its projected 2024 earnings. It is considerably higher than the average for the major tech group known as the “Magnificent Seven” (Amazon, Apple, Facebook parent company Meta, Google parent company Alphabet, Microsoft, microchip manufacturer Nvidia, and Tesla) despite having lost 32% of its value so far this year.