Investing.com – Tesla Inc (NASDAQ:TSLA) saw an increase in subscriptions for its fully self-driving software in the second quarter, driven by promotional offers and price cuts, RBC analysts said. A significant cut in could bring significant upside to the software.
RBC pointed out that Tesla’s FSD software’s cumulative mileage increased by 60% in the second quarter compared with the first quarter. This trend occurred after a free trial in March and the subscription price was reduced from $200/month to $99/month. of.
But RBC noted that despite increased usage, FSD penetration in Tesla’s fleet remains in the single digits, far weaker than peers.
The brokerage believes that if Tesla lowers the price of FSD products to better compete with peers, it could “significantly increase” FSD subscriptions.
“This could immediately boost margins and, more importantly, immediately highlight Tesla stock’s autonomy narrative and multiples, rather than waiting for robotaxis. It could also highlight Tesla’s ability to license FSD to other OEMs potential.
“The company could cut FSD pricing at any time, which we believe would be a key catalyst for the share price.”
Still, RBC lowered its price target on Tesla to $224 from $227, citing much weaker delivery growth forecasts for 2025. Deliveries were dismal as it faced weak profits, increased competition and production disruptions.
Chief Executive Elon Musk has touted the potential of FSD and robotaxis to become major profit drivers. But for Tesla, FSD is still a relatively niche product, and the launch of its robotaxis has been delayed from August to October.
In addition to FSD and robo-taxi, RBC said Tesla’s energy storage revenue will also pick up, while the company will also benefit from higher regulatory credit.
Tesla shares have fallen nearly 23% so far this year as the stock has been hit by falling deliveries and a series of price cuts driven by rising competition in China have eroded its profit margins.
