Tesla recently announced a significant price cut for its Full Self-Driving (FSD) software subscription, reducing the monthly fee from $199 to $99 in North America. This move is seen as an effort to boost the sales of its advanced driver assistance system amidst lower-than-expected vehicle sales reported for the first quarter of 2024. Additionally, this price reduction has led to a slight increase in Tesla's stock price, indicating positive market reception.

In a surprising turn, this price cut contradicts previous statements made by Elon Musk, CEO of Tesla, who had suggested that the cost of Tesla's FSD would increase as the technology improves and gets closer to achieving full self-driving capability with regulatory approval. In 2020, Musk projected on X (formerly Twitter) that the value of FSD could reach as much as $100,000. Following this, in 2022, the price for the lifetime service of FSD was raised from $12,000 to $15,000, with the subscription option priced at $199. However, by last year, the lifetime price was reduced back to $12,000, and now, the subscription price has been halved to $99 per month.

The discounted subscription now refers to the technology as FSD (Supervised), emphasizing that despite its capabilities, the system requires constant monitoring by the driver. This rebranding and the price cut are part of Tesla's broader strategy to increase the adoption of its Level 2 self-driving system. To further encourage trials of this technology, Tesla has started offering a free one-month trial of the FSD beta to all U.S. customers. Additionally, an internal memo from Elon Musk revealed that he has mandated Tesla employees to take new customers on a "short test ride" of FSD before vehicle delivery, to better showcase the technology's capabilities as he believes its effectiveness is underrealized by the public.

Tesla's decision to lower the subscription price follows a period of disappointing performance, with the company reporting its first year-over-year decline in vehicle sales in nearly four years. In the first quarter of 2024, Tesla delivered approximately 386,800 cars, missing investor expectations by about 90,000 vehicles.

Reducing the price of the FSD subscription could not only make the technology more accessible to a wider range of customers but also benefit Tesla by gathering more data to refine its software, as greater usage provides more opportunities for real-world testing and improvement. This strategic move, while at odds with Musk’s earlier assertions, reflects Tesla's adaptability in pursuit of broader adoption of its self-driving technology amidst challenging market conditions.

Tesla has not officially commented on the reasons behind the price reduction or its implications for the future pricing strategy of FSD.