Tesla China's Upcoming FSD Red Light & Stop Sign Feature Could Boost TSLA Q2 Revenue

by Ma. Claribelle Deveza June 05, 2020

Tesla-TSLA-FSD-Q2-2020-Revenue

Featured Image Credit: Tesla

Tesla China will release FSD's traffic light and stop sign recognition soon, according to the official company website in the region. Tesla's (NASDAQ: TSLA) latest additions to Full Self-Driving may be enough to boost Q2 2020 revenue. 

Tesla China added a small footnote after its Full Self-Driving description on its official website. The update roughly translated to, "Coming soon: Identify and respond to traffic lights and stop signs. Automatically assisted driving in city roads."

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Credit: Tesla CN

Based on the footnote's translation, Tesla may be rolling out FSD's Traffic Light and Stop Sign Control (Beta) feature to China soon. The same feature was released in TSLA's 2020.12.5 OTA software update in the United States. 

The feature's release in China could boost TSLA's revenue for Q2 2020. Tesla has not been able to include FSD revenue in its income statements so far. Tesla CFO Zachary Kirkhorn briefly explained FSD's revenue recognition during TSLA's Q2 2019 Earnings Call. "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. 

For part of FSD revenue to be recognized, Tesla must release a certain percentage of the software and deliver it to the customer. Since the beginning of the year, Tesla has ramped Autopilot updates, providing a strong foundation for Full Self-Driving. Then in April, FSD's Traffic Light and Stop Sign Control (Beta) feature was released. It may be enough for Tesla to recognize at least a small portion of its FSD revenue in its income statements. 

The FSD feature's availability in China could boost TSLA's revenue significantly. Tesla China recently pushed to increase FSD sales in the Chinese market by offering a zero-interest financing promotions. Tesmanian sources suggested that Tesla China's FSD suite push was successful, and all the owners who took advantage of the promotion will receive the Traffic Light and Stop Sign Control (Beta) feature as soon as it's rolled out to the country.

If Tesla manages to achieve revenue recognition for its Full Self-Driving suite, it may finally be recognized as a tech stock and its potential as a tech company. As Tesla continues to improve FSD, more of its revenue can be recognized. Elon Musk also predicted that demand for Tesla's FSD package could increase as more features roll out in the future.

"Yeah, on the gross margin point like the -- like Full Self-Driving is just an extremely important part of the larger calculation and the features for Full Self-Driving are only as [a] portion of them have rolled out. So the revenue recognition on the Full Self-Driving option is limited at first until those futures roll-out and also the demand for Full Self-Driving packages limited because the features are mostly prospective instead of current. 

But as those features roll-out, I would expect the take rate for Full Self-Driving to increase significantly as well as the recognition -- revenue recognition Full Self-Driving to obviously match the roll-out of the product. So the gross margin over time, will be really quite compelling when factoring in the Full Self-Driving option, which is, yeah, kind of to 7k in mid-August, and that's number will increase over time," Musk said during the TSLA Q2 2019 Earnings Call.

Legal Disclaimer --

This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Ma. Claribelle Deveza, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Ma. Claribelle Deveza holds zero share of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.




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