Tesla's Full Self-Driving feature could add $20 billion a year in revenue, Gene Munster says

According to Gene Munster, Tesla's Full Self-Driving (FSD) software has the potential to significantly enhance the company's earnings. By granting licenses for this technology at a reduced cost, Tesla could accumulate approximately $20 billion annually. On Thursday, the company experienced an 8% decline in its stock value as investors absorbed the news of decreased profit margins during the second quarter.

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The inclusion of the "Full Self-Driving" functionality in Tesla vehicles holds significant importance for the company's stock. According to Gene Munster, this technological advancement has the capability to potentially increase revenue by a staggering $20 billion annually.

The managing partner of Deepwater Asset Management referred to the statement made by Elon Musk during Tesla's earnings call for the second quarter. Musk confirmed that the company was engaged in discussions with a significant manufacturer to obtain permission for the use of its Full Self-Driving software.

Allowing access to Tesla's FSD technology may prove highly advantageous, as rival companies are prone to adopting an existing cutting-edge technology rather than investing resources in creating their own rendition.

Munster expressed in a statement on Wednesday that the economic possibilities of licensing FSD are considerable.

According to Munster's estimation, if Tesla lowers the cost of upgrading from Basic Autopilot to FSB to $100 per month and licenses the software to a quarter of all new cars and light trucks available, the company could potentially increase its revenue by approximately $4 billion.

According to his estimations, by the fifth year, there is a high possibility that their annual revenue could increase by an extra $20 billion. Furthermore, in a decade, Tesla's operating income could reach a staggering $100 billion. This implies that the licensing of FSD would contribute an extra 20% to their profits generated from operations.

"Although these goals are still distant in the future, it demonstrates that the potential for FSD licensing is significant and deserving of patience," Munster expressed.

In the meantime, the value of Tesla shares dropped by 8% on Thursday as investors analyzed the financial performance of the company during the second quarter. During this period, the company experienced decreased profit margins as a result of significant reductions in prices for their top car models throughout the previous year.

However, Munster anticipates an increase in margins in the coming years, projecting a gross margin of 20% by the conclusion of 2024.