Question

Elon Musk has said that he believes Tesla’s full self-driving package will exceed $100,000 in value (it is $8,000 now) once the automaker achieves actual self-driving. Is this price even a remote possibility? Would such a high barrier-to-entry prohibit many from buying the package? What is the potential reasoning with a future decision like this?

Answer 1

Tesla has launched an advanced version of cars known as ‘Tesla Autopilot’. As its name suggests, the idea is to make the driving completely automatic. This is the vision of Elon Musk. As interesting the idea sounds, it’s price is also interesting. He said that he is very close to make his car fully automatic and as close he gets, the price will also increase and it may reach /exceed $100,000.

He has increased the price before as well as by introducing new features in FSD software package.

Though world is yet to see a fully self driving car and Tesla has came a long way in achieving the dream but the price which he mentioned is far from reality. This appears to be a very good strategy since most of the Tesla car owners have not purchased the FSD version and conveying them that price is gonna be very high in future will lure the buyers to buy the technology now.

However, it will not act as a high barrier-to-entry and will not prohibit the buyers from buying the package. This is because the price $100,000 is a speculation at this point of time and final product is not ready as of yet. Buyers can buy the FSD version by version and price will be what the worth of product is. It’s currently $8000 (as increased by $1000 from 01^st July).

The potential reasoning with this decision of Elon Musk is the hype that is created around Auto Pilot cars like we have planes. This however is not something which is easily achievable and that why’s Elon have ready customers who wants to buy the car at whatever price it is sold. Further, telling the customers that price is going to increase in near future creates an intrinsic demand for the product. This is because no one wants to buy the same product at a higher price. This will help boost sales of Tesla now. We can see some hikes in near future but reaching it to $100,000 is not that much practically feasible.