Tesla's Autopilot Discontinuation: A Risky Push for FSD Amid Stagnant Adoption

What happened

Tesla has discontinued its basic Autopilot driver-assistance system in an effort to boost adoption of its more advanced Full Self-Driving (Supervised) software. This move aligns with the company's strategic pivot toward autonomy and AI, as detailed in the DeepValue report, which highlights Tesla's reliance on FSD and Robotaxi narratives to justify its high valuation of 268x trailing P/E. However, the report notes that FSD penetration remains low at around 12%, with FSD revenue declining year-over-year, indicating weak consumer uptake despite previous marketing pushes. By eliminating Autopilot, Tesla is employing a coercive tactic to force customers toward FSD subscriptions, but this risks alienating users who depend on basic features and may not translate into meaningful adoption gains. Ultimately, this action underscores Tesla's aggressive monetization strategy for autonomy, set against a backdrop of declining automotive deliveries, intense EV competition, and ongoing regulatory scrutiny from NHTSA.

Implication

Investors should interpret this move as a high-stakes attempt to accelerate FSD revenue, which is critical for sustaining Tesla's premium valuation given its dependence on software growth amid maturing auto margins. However, with FSD penetration stagnant and regulatory risks looming—such as the NHTSA investigation deadline in February 2026—this strategy introduces additional uncertainty without clear evidence of increased demand or safety improvements. The energy storage segment continues to perform well with high margins, but it remains a minority of revenue and cannot alone justify Tesla's current market cap, highlighting the disproportionate weight placed on autonomy success. If FSD adoption fails to improve materially, Tesla could face significant multiple compression as markets reassess its AI narrative against actual financial metrics, potentially leading to further downside from current levels. Therefore, while this change might temporarily boost subscription metrics, prudent investors should maintain a skeptical stance, focusing on upcoming catalysts like Q4 2025 earnings and regulatory outcomes before reconsidering the investment case.

Thesis delta

The DeepValue report's STRONG SELL rating, based on overvaluation and weak FSD adoption, remains unchanged by this news. Instead, it reinforces the thesis that Tesla is taking aggressive, potentially desperate measures to drive FSD uptake without resolving fundamental barriers like consumer reluctance and regulatory hurdles. Investors should view this as confirmation of the risks outlined in the report, with no shift in the negative outlook until concrete evidence of improved FSD penetration and revenue growth emerges.