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Tesla Facing Demand Problem Because People Don't Want To Upgrade Their Cars

Despite ramping up two new gigafactories, Tesla's production seems to have peaked in the last quarter of 2022. There could be many reasons for that, and one of them is that Tesla owners don't want to upgrade their cars. Especially those who paid for the FSD capability are reluctant to buy another car because they need to pay again for the self-driving software.
Tesla has a demand problem because people don't want to upgrade their cars 11 photos
Photo: Tesla | Edited
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Although Tesla and Elon Musk deny it, Tesla has a demand problem. The first quarter of the year started with massive discounts meant to keep the metal moving. For a while, they seemed to work, but soon the inventory level increased again. It reached an all-time high at the end of April despite several price cuts throughout the quarter. It was clear that price cuts alone would not convince people to buy more Teslas.

Some suggested that Tesla should start advertising educating people about the benefits of owning an electric vehicle. This should work, although Tesla never paid to promote its cars. The EV maker always relied on its fans to spread the word and do all the marketing for free. This has worked well, but if Tesla wants to get out of the geek bubble, it might want to make some efforts to convince new people. These include those that mocked Tesla and electric vehicles, which might be the hardest thing to do.

There's another problem, as some have indicated. Tesla has been building the same models for years, and the Model Y is nothing but a Model 3 with a twist. Even though the cars have been improved constantly, they don't offer enough reasons to upgrade for those who already own a Tesla. Even with Project Highland on the horizon, the changes might not be compelling enough. We've seen this with the Model S and Model X, which don't sell well despite the recent refresh. After all, it's pretty much the same car with the same design and similar performance.

Not only do they not have reasons to upgrade, but many have strong reasons to keep their existing EVs. Tesla offered unlimited supercharging to early adopters, and some are still using their cars. This is not transferable, and people try to keep the lucky cars for as long as possible. The elephant in the room is the Full Self Driving capability, though. This, too, is not transferable, and, considering how much it costs, it's a solid reason for people to refuse to trade in their Tesla for a newer model.

The FSD capability started at $5,000 in 2019, but the price was raised three times that year, two times in 2020, and two times in 2022, reaching a whopping $15,000. Despite this, paying for FSD capability guarantees nothing. Many Tesla owners paid and only got access years later, while others are still waiting to see what their hard-earned money bought.

Understandably, many refuse to sell their car after paying that much. Although some people think the price can be recouped when you sell the vehicle, this is hardly the case. FSD Beta is hard to sell even for Tesla at this time. You could convince someone to pay more for the car because it has the FSD Beta when you sell it, but nothing close to $15,000. Then there's the dreadful perspective of totaling your car. In this case, your "investment" goes up in smoke.

In 2021, Tesla introduced an FSD Beta monthly subscription at $199, facilitating access to the self-driving software. This is also non-transferable, but at least you can cancel it when you don't need it or want it anymore. However, a better choice would be to have FSD tied to the driver's account instead of the car.

This way, more people would be willing to pay for it and benefit even when they change their car or rent a Tesla in another city. At the same time, owners would have fewer reasons to hang on to their old cars. Is the FSD capability worthy of your hard-earned dollars? How much would you pay for such a feature? Let us know in the comments below.

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About the author: Cristian Agatie
Cristian Agatie profile photo

After his childhood dream of becoming a "tractor operator" didn't pan out, Cristian turned to journalism, first in print and later moving to online media. His top interests are electric vehicles and new energy solutions.
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