Arne Alsin is the CIO of Nightview Capital.

In March 2017, I made a big call in Forbes that suggested Tesla presented the ultimate disruptive threat to the legacy automakers.

My argument was simple: unburdened by a legacy business model tied to combustion engines, Tesla was free to pursue electric vehicles, artificial intelligence, and energy storage. Ultimately, my view was that combustion engine vehicles would go the way of the horse and buggy—and the legacy OEMs could face extinction.  

Seven years later, I have an updated thesis.

Rather than destroying the legacy auto business, Tesla just might be the savior of the very industry I expected it to dismantle. I know what you’re saying: “Woah, really Arne? Have you totally lost it?” 

Hear me out. This is my new view: Tesla’s Full Self-Driving (FSD) technology has the potential to revolutionize traditional automakers’ business models, transforming them into profitable, tech-driven enterprises. The key word here is “potential,” even though I think it’s highly likely to happen. It’s a probability that investors should consider. 

Let me explain. 

 The FSD Licensing Game-Changer

In my opinion, the real transformative potential lies in licensing Tesla’s FSD technology. 

This is what I hadn’t considered in 2017. 

Once viewed by many (including me) as a threat to traditional automakers, Tesla’s FSD could become their saving grace. By licensing this technology, companies like Ford, General Motors, and Mercedes could transition from low-profit, market-neglected enterprises to robust, cash flow-generating businesses. It could also allow for the market to reprice these businesses—and expand their multiples. 

Consider the financial impact: if Ford produces 400,000 FSD-capable EVs annually, the cumulative revenue from licensing fees and ongoing service could drastically change its business model. 

In my opinion, this shift from a one-off profit model to a recurring revenue stream could improve Ford’s cash earnings tenfold within a few years. See where I’m going with this?

The Scaling Challenge

Our team at Nightview Capital has been researching the autonomous driving space for several years. Our conclusion, based on this research, is basic: no companies have yet to match Tesla’s scalability and readiness when it comes to autonomy. Companies across the globe are making strides, but Tesla’s data advantage, with over six million cars on the road collecting data from 50 million cameras daily, is unparalleled.

Tesla’s FSD stands out because it is the most scalable solution available. Competing technologies from companies like Waymo and Baidu, while credible, face significant scaling challenges, in my opinion. While operational, these solutions rely on high-definition mapping and a combination of Lidar, radar, and numerous cameras, making them costly, time-consuming to deploy broadly, and currently require remote human operators to oversee.

The basic story is this: these companies don’t have the vertical integration that’s required for scale. 

In contrast, Tesla’s approach requires embedding just eight cameras and an inference computer into each vehicle that the company manufactures. All Tesla vehicles manufactured in the last several years feature this equipment. This simplicity and efficiency make Tesla’s FSD not only scalable—but also economically viable for commercialization.

If we look at the business world for an analogy, there are a few instances of technologies so technically difficult that they are nearly impossible to replicate or copy, regardless of financial resources. General Motors, for example, has spent $8 billion on autonomous technology but has achieved only a lagging solution, in our view. The challenge is not just financial—but also technical.

Or consider ASML’s dominance at a critical juncture of the semiconductor value chain: the company is the top manufacturer of extreme ultraviolet lithography machines. Many companies have tried to catch up to ASML’s prowess, but the company’s technology is extraordinarily complex. ASML relies on 600 suppliers worldwide, combining vast know-how and technical wizardry. Despite years of effort, no competitor is close to matching their capabilities, in our view. 

Another analogy is SpaceX’s dominance in the space launch industry via its superior reusable rockets. Billions of dollars have been invested by competitors like Rocket Lab, Blue Origin, Orbex, Stoke Space, United Launch Alliance, and several companies in China. One example – the Ariane 6 has been in development for 10 years, costing $4.4 billion – and it’s still not reusable. 

In contrast, SpaceX developed the Falcon 9 for one-tenth of that cost, around $450 million, and has been reusing the first stage for seven years. No other company has matched SpaceX’s ability to reuse the first stage safely, with some stages having been reused up to 22 times.

The Strategic Shift for Automakers

Traditional automakers face a crucial decision: continue investing billions in developing autonomous technology independently—or license Tesla’s increasingly proven FSD technology now. Licensing offers a compelling alternative by allowing these companies to shift from heavy capital expenditures to capital inflows.

For instance, we believe Ford recently signaled its intent to move in this direction. Ford CEO Jim Farley, in a recent interview, potentially hinted at licensing advanced autonomy technology from Tesla. This move would not only save Ford from massive annual investments but also enable it to build a fleet of FSD-enabled vehicles, thereby creating a substantial new revenue stream.

The Customer Advantage

Consumers also stand to benefit significantly from this shift. 

FSD-capable cars promise enhanced residual value and the potential for car owners to monetize their assets by participating in ride-sharing or grid stabilization programs. 

This dual benefit of higher resale value and new income streams makes FSD-equipped vehicles an attractive proposition for consumers.

A Win-Win-Win Scenario

In my view, this relationship between Tesla as a licensor and traditional automakers as licensees creates a win-win-win situation. Automakers transition from capital outflows to inflows while offering better products to customers. Customers gain vehicles with higher residual value and the potential to generate income. 

Society benefits from safer roads, reduced accidents, and a new revenue stream for governments. 

Ultimately, the jury is out. But to traditional automakers, the stakes are high. Adapt or perish. In this dynamic, Tesla’s role in the auto industry may evolve from disruptor to savior. 

By licensing its FSD technology, Tesla can help traditional automakers transform their business models, improve profitability, and offer superior products to consumers. 

This shift not only revitalizes the auto industry but also creates broader societal benefits, proving that Tesla’s impact extends far beyond its own vehicles.

Disclosures:

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