Tesla sees new revenue in upgrades

Tesla rolls out a new model that allows owners to buy upgrades directly from their vehicle’s centre dash screen in a bid to increase revenue.

Tesla Model S dynamic shot

Tesla chief executive Elon Musk wants more from the owners of the company’s electric vehicles.

Down the line, additional sales can come from software-enabled features such as autonomous driving, and all that hardware in EVs is an opportunity, too.

Tesla has recently unveiled its track package for Model S Plaid sedans. It will be available in June, and is priced from $US15,000 (about $22,500) to $US20,000. It’s compatible with Model S Plaids produced in 2021 and beyond.

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A track package improves vehicle performance on, well, racetracks. The new Model S package unlocks a top speed of 320km/h. That is most likely via a software update. Tesla didn’t respond to a request for comment on the package. The package also includes a lot of hardware upgrades including tyres and carbon ceramic brakes.

Tesla is taking accessibility a step further by letting owners buy upgrades directly from their vehicle’s centre dash screen. Credit: u/sageDieu | r/TeslaMotors

Musk spoke of deriving more sales from EV owners on Tesla’s first-quarter-earnings conference call. “We’re making a car that, if autonomy pans out, and we think it will … will be worth a hell of a lot more in the future than it is now,” Musk said. “So it is … possible to sell (a car) at zero profit, but still have the net present value of future cash flows associated with that (sale) very significant.”

Musk wants to generate profits on the installed base of Tesla EVs.

Most of the time he focuses on Tesla’s Full Self-Driving software when talking about the strategy, but Tesla also owns its dealer network, giving the company the opportunity to do things such as the Plaid track upgrade.

The kits also have the potential to boost sales of Model S vehicles. Tesla delivered 10,695 Model S and X vehicles in the first quarter. (Both those vehicles are produced on the same platform.) Wall Street had expected about 17,500 units. It was a miss.

Tesla delivered 422,875 vehicles overall in the first quarter. That was in line with Wall Street estimates. Model Y and 3 vehicles are the majority of sales.

The screen in the Model S

Tesla is also offering three years of unlimited supercharging on Model S sedans. (Tesla owns its network of EV chargers.) That’s another incentive Tesla can offer to try to help demand. Investors don’t like to see incentive spending rising for vehicles as it can signal weakening demand.

That same supercharging benefit isn’t available on the Model Y and 3s. It isn’t certain that investors would dislike that type of incentive, given what has already happened this year. Tesla has adjusted prices for Model Y and 3 vehicles several times in 2023 to boost demand. It has hurt profit margins. Investors might like to see Tesla trying other things to improve demand that might not be a direct hit to profits.

Coming into this month, Tesla stock was down about 11 per cent since the company’s first-quarter report, when Musk seemed to de-emphasise making money on the initial sale of Tesla vehicles.

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