Part 6/10:
A central argument for Tesla’s bullish case hinges on its software and margin strategies. Full Self-Driving (FSD), a key growth driver, is expected to generate high-margin software revenue. Even with modest car sales margins, Tesla’s ability to sell FSD as an add-on—potentially at $20,000 per vehicle—could create substantial profits. Musk has previously emphasized that Tesla could achieve gross automotive margins of around 50%, thanks in large part to software.
Furthermore, Tesla’s pricing adjustments in China, while temporary and strategic, have not significantly dented overall revenue or gross margins. The price cuts are viewed as a move to retain market share while adapting to production cost reductions—offering a pathway to sustained profitability.