Investing.com – Tesla Inc. (NASDAQ:) saw subscriptions to its fully autonomous driving software rise in the second quarter amid special offers and price cuts. Analysts at RBC noted that a deeper reduction in subscription prices could provide significant upside for the stock.
RBC found that cumulative miles driven using Tesla’s FSD software increased 60% in the second quarter compared to the first. This trend followed a free trial in March and a reduction in the subscription price from $200 to $99 per month.
However, RBC found that despite increased usage, FSD penetration in the Tesla fleet remained in the single digits, much weaker than comparable vehicles.
The brokerage argued that Tesla could “significantly increase” FSD subscriptions if it lowered the price of its FSD offering to better compete with its rivals.
“This could lead to immediately improved margins and, more importantly, highlight the autonomy story and multiply Tesla stock immediately, rather than waiting for robotaxis. It could also highlight Tesla’s potential to license FSD to other OEMs.”
“The company could lower its FSD prices at any time, which we believe would be a key catalyst for the shares.”
Nevertheless, RBC cut its price target for Tesla to $224 from $227, citing a significantly weaker forecast for delivery growth in 2025. The reason was that the electric car maker reported dismal earnings and deliveries in the second quarter and struggled with weaker margins, increased competition and production disruptions.
CEO Elon Musk has repeatedly stressed that FSD and robotaxis could become a major revenue driver. But FSD still remains a relatively niche product for Tesla, and the launch of its robotaxis has been pushed back from August to October.
Beyond FSD and robotaxis, Tesla’s revenue from energy storage would increase, according to RBC, while the company would also benefit from higher regulatory credits.
Tesla shares have fallen nearly 23 percent so far this year, hit by falling deliveries while a series of price cuts amid increasing competition in China have hit the company’s margins.
