Tesla turns to AI services for growth after BYD overtakes it in EVs
Tesla is shifting its growth strategy towards autonomy software and AI services, which could bring in recurring revenue at higher margins than car sales. The move matters as the company has lost its position as the world’s largest electric vehicle maker to China’s BYD, while carmakers face stronger Chinese competition and seek new sources of income.
Cars still account for 75 per cent of Tesla’s revenue and help fund its AI investment. Its supervised Full Self-Driving software requires drivers to remain attentive, but more than 75 per cent of new Teslas sold in North America include it, and the company has 1.7 million active subscriptions worldwide, up 67 per cent in a year; the US price is $99 a month. Analysts say broader adoption could significantly change Tesla’s finances, though regulatory approvals remain a hurdle: the EU decision on wider rollout has been delayed until December.
In short
- Tesla is betting on autonomy subscriptions for growth.
- It has 1.7 million active FSD subscriptions worldwide.
- Wider European approval remains uncertain.
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The case for
Tesla’s shift towards autonomy software and AI services could create recurring, higher-margin income and reduce its reliance on car sales amid intensifying competition. Strong uptake of supervised Full Self-Driving suggests customers see value in the service, and growing software revenue could help fund further AI development.
The case against
The strategy’s prospects remain uncertain: cars still provide most of Tesla’s revenue, and supervised Full Self-Driving requires drivers to stay attentive, so it is not yet a fully autonomous service. Wider rollout depends on regulatory approval, while relying on software growth may not offset the pressure from stronger competition in the vehicle market.
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Originally published by Ars Technica as “Tesla gave up the EV crown. Now it wants to win the autonomy race”.