Tesla, the electric vehicle (EV) industry pioneer, is once again making headlines with its groundbreaking Full Self-Driving (FSD) software, version 12 (v12). This latest innovation takes the company one step closer to achieving Level 4 or Level 5 autonomy, where drivers no longer need to monitor the car while it’s in motion.
The road to autonomy
Tesla has earned a reputation for pushing the boundaries of innovation, and FSD v12 is no exception. On August 25, CEO Elon Musk showcased this remarkable software in action, sitting in the driver’s seat of a Tesla Model 3 while the vehicle autonomously performed tasks like parallel parking, obeying traffic lights, and navigating roundabouts—all while Musk recorded the experience on his phone.
While FSD v12 is not without its limitations and requires further refinement, it represents a significant leap towards Level 4 and Level 5 autonomy. What sets v12 apart from its predecessors is its heavy reliance on neural networks powered by AI. Unlike earlier FSD versions, which required human programmers to hard-code responses for various driving scenarios, v12 uses AI to analyze vast amounts of video and driver behavior data collected from Tesla’s fleet of 4 million vehicles worldwide.
AI takes the wheel
The key breakthrough of FSD v12 lies in its ability to make autonomous decisions without human intervention. Thanks to AI advancements, the software no longer requires human programmers to define specific actions for every driving situation. Instead, it leverages self-training neural networks to interpret and choose the most appropriate response by learning from the extensive data it has access to.
This shift is a game-changer because it significantly accelerates the development of autonomous driving. Previous versions of Tesla’s FSD faced limitations due to the unpredictable nature of driving, requiring programmers to account for countless variations. With FSD v12 and its self-training neural networks, the software becomes more capable of adapting to diverse scenarios on its own.
The road ahead
While achieving Level 4 or Level 5 autonomy promises safer roads, Tesla has a broader goal in mind: the creation of a robotaxi business. This endeavor is currently Tesla’s top priority, driven by Elon Musk’s belief in the “quasi-infinite demand” for such a service. Moreover, it could fundamentally transform Tesla’s revenue streams.
A robotaxi fleet could revolutionize Tesla’s financial prospects and potentially elevate the company to one of the world’s most valuable. Although Musk’s timelines and predictions are known for their boldness, others share his vision. Ark Invest, a firm known for its enthusiasm for Tesla, conducted a Monte Carlo simulation in April 2023 to assess the impact of a robotaxi business.
The financial transformation
Ark Invest’s simulation yielded results across bearish, average, and bullish scenarios. Even in the bearish scenario, where robotaxis generate $200 billion in annual revenue, it represents a 700% increase from Tesla’s current revenue of under $25 billion. In the most optimistic projection, robotaxis could contribute nearly $613 billion in revenue, a staggering boost.
Furthermore, Ark Invest’s analysis suggests that robotaxis could contribute more than two-thirds of Tesla’s future earnings before interest, taxes, depreciation, and amortization (EBITDA). While such simulations inherently come with limitations, they underscore the transformative potential of autonomous driving and a thriving robotaxi business for Tesla.
Opportunities on the horizon
Despite Tesla’s recent stock price decline, which can be attributed to macroeconomic factors like inflation and rising interest rates, the company remains well-positioned for the future. Tesla’s financial stability, ongoing record-breaking production, and revenue figures provide a solid foundation for weathering market fluctuations.
With the promise of a highly profitable robotaxi venture and FSD advancements, Tesla could continue to lead the way in AI, electric vehicles (EVs), and investment portfolios. For investors, the current moment of share price adjustment may offer an opportune entry point into the world of Tesla.
Tesla’s FSD v12 represents a significant milestone in the journey towards autonomous driving. Its reliance on AI-driven decision-making opens up new possibilities for Tesla’s business, including the potential for a lucrative robotaxi service. While the future remains uncertain, Tesla’s commitment to innovation and its impressive track record suggest that it is poised to play a pivotal role in shaping the future of transportation.
