Tesla’s autonomous driving subscription has arrived. This will benefit General Motors.

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the company that transformed the auto industry with consumer electric vehicles, has rolled out something that could be even more important to the industry: monthly subscriptions for the software behind its higher-level driver assistance options .

Tesla (ticker: TSLA) made its Full Self Driving system available on Friday for $ 99 to $ 199 per month. Although the stock has not increased – no surprise a day when renewed fear about Covid-19 left the

S&P 500

and

Dow Jones Industrial Average

with respective losses of 1.6% and 2.3%, it is a big deal.

Elon Musk’s business is used to making waves in the automotive industry. Tesla began convincing rivals that electric vehicles could be practical and cost effective when it started selling the Model 3 in 2017. Consumers loved the cheaper sedan.

Now, companies from

General Motors

(GM) at

Volkswagen

(VOW.Germany) invest billions in the development, battery technology and manufacturing of electric vehicles. The shift from internal combustion engines to battery-powered personal transport is considered a fait accompli.

Investors and analysts no longer worry about whether Tesla can make it happen. They spend their time on Tesla’s share of the electric vehicle market and project the overall growth of the industry. Soon auto investors and analysts will have to learn software investing terms like ARPU – average income per unit or user – as Tesla and rivals try to conquer self-driving vehicles.

New models of

General Motors

(GM),

Ford

The engine (F), Volvo and others can drive on the highway or on well-marked city roads, automatically adjusting speed and direction. Drivers should always be ready to take over at any time, but manufacturers expect to end up producing cars that can drive safely without interference.

It would be a valuable and lucrative feature. Until Friday, Tesla drivers could only buy Full Self Driving, or FSD, for $ 10,000, in addition to the standard autopilot feature. That’s a lot for any automotive feature, and drivers have complained that the purchase is not transferable to new Tesla vehicles.

Now that FSD is available through a monthly subscription, these two issues are basically resolved. And at $ 200 per month, FSD subscriptions have the potential to generate billions in sales, with high profit margins, in the years to come. The company has approximately 1.6 million eligible vehicles on the road and delivers approximately 200,000 new cars each quarter, an amount that is increasing.

New Street Research analyst Pierre Ferragu calculates that by 2030 Tesla will make about $ 7,000 in profit selling a car and nearly $ 23,000 selling FSD subscriptions on that vehicle. With an economy like that, he sees the entire industry migrating to subscription pricing.

While older Chevrolet Impalas, for example, cannot be upgraded to the higher levels of GM’s autonomous driving software, Super Cruise, GM will also have millions of vehicles with the required software in 2021 and beyond. . That means he could follow Tesla’s lead in a new pricing model. The same goes for Ford, with BlueCruise, and Volvo, with Pilot Assist.

How much a traditional automaker might charge for its autonomous driving software and how its margins stack up against Tesla’s would depend on the quality of the product. But even $ 50 per month subscriptions would amount to tens of billions of dollars in found money in a few years.

Car buyers are already paying for some features on a monthly basis. GM has OnStar and drivers signed up for satellite radio, but nothing on the market now has as much potential as autonomous driving software to increase industry profits.

Now that the subscription price has arrived, investors can stop wondering when it might land. The focus should now be on comparing systems and how quickly they improve.

Write to Al Root at [email protected]