Tesla (TSLA) Recognized $48 million Of Deferred Revenue for FSD Improvements

by Ma. Claribelle Deveza July 23, 2020


Featured Image Credit: Tesla 

Tesla (TSLA) recognized US$48 million of deferred revenue from its Full Self-Driving (FSD) package sales thanks to the release of its Stop Light and Stop Sign recognition and response feature. It marks a milestone for Tesla and its FSD suite.

“With the release of Stop Light and Stop Sign recognition and response, we recognized $48 million of deferred revenue in the period. The full profit impact on our P&L is less than half of this due to cost associated with FSD computer retrofits in the field,” said Zachary Kirkhorn, Tesla’s CFO.

During TSLA’s Q2 2019 Earnings Call Kirkhorn briefly explained FSD’s revenue recognition. "Note that we continue to defer a significant portion of revenue associated with Full Self-Driving, which will be recognized in future periods. Upon the release of additional features," he said. 

The company’s Traffic Light and Stop Sign Control allows Tesla vehicles to recognize and respond to traffic lights, stop signs, and intersections. In June, Tesla China announced that the FSD feature would be available to local drivers and Tesmanian predicted it could contribute to the company’s Q2 2020 financial results. As Tesla introduces more features and functionalities to FSD, it might recognize more of its deferred revenue, which bodes well for future quarters.

HyperChange host Gali Russell predicted that FSD could increase in price up to US$20,000. He calculated how FSD could raise Tesla’s potential profit and gross margin per car sold in one of his latest videos.

Elon Musk described how fast FSD could raise the value of Tesla’s fleet overnight during the second-quarter Earnings Call. “Right now, by far, FSD is just overwhelmingly the most important thing. I think the upgrading of the fleet to full self-driving essentially with an over-the-air software update, it may go down as the biggest asset value increase in history as a step change,” he said.

“Maybe there’s something bigger. But it’s certainly would be one of the biggest. I can’t think of anything bigger. So sort of overnight 1 million — depending on exactly when it happens and when it’s allowed in various regulatory jurisdictions, you would have like at least few million cars suddenly becoming five times more valuable or something like that.”

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