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Tesla Full Self-Driving (FSD) potential recognized by RBC Capital analyst

Credit: Tesla

It appears that some analysts are starting to recognize the significance of Tesla’s (NASDAQ:TSLA) Full Self Driving (FSD) efforts to the company’s future. This was hinted at in comments from RBC Capital analyst Tom Narayan, who noted that FSD in China would be “significant.” 

The RBC analyst also reiterated an “Outperform” rating for TSLA stock, as well as a price target of $293 per share. As noted in an Insider report, Narayan covers the Consumer Cyclical sector, and he focuses on stocks like Tesla, Ferrari, and the Mercedes-Benz Group. He also has a 54.50% success rate on his recommended stocks. 

Narayan echoed some of Tesla CEO Elon Musk’s longtime points about FSD in his report, noting that such systems could eventually become mandated by regulators as a life-saving tool. The analysts noted that as systems like FSD are recognized for their benefit to consumers, Tesla could see some potential as a provider of the system. 

Following is the RBC analyst’s comments on Tesla FSD: 

“What do we think? Winning FSD in China would be significant. It would unlock a significant fleet of Tesla vehicles able to charge subscription fees. This is central to our investment thesis on the stock and we do include some Tesla FSD capture in China. Importantly, while initially we envision several Level 2+ players, it pushes Tesla further to be an industry standard for software. 

“We also envision a scenario where regulators mandate Level 2+ as a life-saving tool. Tesla FSD is 5x safer than the US fleet according to US accident data provided by the company. In the same way seat belts and airbags were mandated on vehicles we could see Level 2+ offerings. Another benefit could be increasing the chance for Tesla to license software to other OEMs. This is a small part of our thesis however as remains a call option. 

“One concern we have heard voiced from investors’ concerns whether Chinese companies could pirate the software but FSD is more than software. It includes millions of hours of driving data from autopilot interactions and algorithm training which happens in the US. This could happen quicker than the FSD Licensing. FSD is 20% of our valuation and we have assumed only 8% market share.”

Tesla noted in its Q1 2024 Update Letter that FSD users have passed 1.3 billion cumulative miles. Interestingly enough, Musk noted in Master Plan Part Deux, which he wrote lack back in July 2016, that he believes worldwide regulatory approval for autonomous vehicles would require something on the other of 6 billion cumulative miles (10 billion kilometers). If Tesla successfully rolls out FSD in China, and if more customers opt in for the service, the idea of hitting 6 billion cumulative miles would be more than feasible.

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Tesla Full Self-Driving (FSD) potential recognized by RBC Capital analyst
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