Elon Musk and Tesla have unveiled yet another pioneering pricing innovation: Tesla is making its Full Self-Driving system available exclusively through a monthly subscription, rather than a one-time purchase. Today, owners can still buy the package outright for $8,000; but beginning Feb. 14, it transitions fully to a $99-per-month subscription. In other words, to use Tesla’s self-driving capability, which will become the global default in a few years, you will subscribe to it the same way you subscribe to SaaS products.
And therein lies Musk’s brilliance. Tesla continues to redefine how cars are monetized, transforming automotive economics into software economics. Years ago, in Harvard Business Review, I wrote about the Intel Inside campaign, one of the most powerful marketing innovations ever created, showing that innovation is not just engineering; pricing innovation can reshape an entire industry. Tesla is proving that thesis at scale.
Good People, the real reason Tesla commands a valuation larger than many global automakers combined is not only because of its engineering excellence; it is because of pricing innovation. Tesla has made the business of selling cars mimic the business of selling software. Investors reward Tesla with software-like multiples because every Tesla car becomes a recurring revenue machine until it reaches the landfill. No other automaker has cracked this model at scale.
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With the shift of Full Self Driving to subscription-only, Tesla has quietly exited the traditional automotive industry. It is now a software company that happens to manufacture cars.
And it is what it is: the most powerful element of any company is its Business Model, the logic of how it makes money. When your pricing model is organic and recurring, like the ancestral Igbo road that leads to the stream, where weeds never cover the roads, you build a future of abundance. In Igbo cosmology, weeds never cover the road to the stream because it must always be used; but the road to fetch firewood fades because once the wood is gone, no one uses the road as the farm enters fallow.
Subscription is the road to the stream, value flows continuously. One-off payment is the firewood, useful once, then gone. Tesla has chosen the stream. And in that journey, it continues to unlock generational value.
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