Elon Musk says 'major OEM' may license Tesla's self-driving vehicle software

Tesla CEO Elon Musk said a "major OEM" is interested in licensing the software and hardware that the EV maker is developing for vehicle autonomy. He did not name the automaker.

Musk likened interest in Tesla's Full Self-Driving software, along with its camera-based hardware, to agreements made with other automakers to use its Supercharger network.

"We are already in early discussions with a major OEM about using Tesla FSD," Musk said Wednesday on the automaker's second-quarter earnings call. "We're not trying to keep this to ourselves. We're more than happy to license it to others."

Tesla's self-driving software and hardware do not make its vehicles autonomous, and it is classified as an advanced driver-assistance feature, similar to those offered by other automakers that require a human driver to be in control at all times.

Musk said on the earnings call that while he has been criticized for predicting year after year that the software was nearing autonomous capability, he's repeating the prediction again. Musk said Full Self-Driving should be able to drive autonomously as safely as a human driver by the end of this year.

In recent weeks, Tesla has reached agreements with several automakers to open its Supercharger fast-charge network to non-Tesla vehicles and to allow them to use Tesla's charging connector in their vehicles for free. Tesla calls its connector the North American Charging Standard, or NACS. Non-Tesla vehicles now use a different connector.

Automakers planning to use the Supercharger network beginning next year and to adopt the connector in their vehicles include Ford, General Motors, Rivian, and most recently Nissan.

Musk suggested that like Tesla's connector, automakers could eventually use Full Self-Driving. The difference, Musk said, is that Tesla is not charging for the use of the connector since it is an open standard without licensing fees.

Automakers such as Ford and GM have their own advanced driver-assistance features. Some are more highly rated than Tesla's self-driving software by industry experts and allow for hands-free driving, which Tesla does not. None are autonomous.

Musk also said during the earnings call that Tesla remains willing to sacrifice profits for volume growth. Future Full Self-Driving software sales to Tesla owners will eventually make the company far more profitable than it is today, he added.

Tesla cut vehicle prices earlier this year. As a result, the company's gross margin in the second quarter fell to 18.2 percent from 25 percent in the same quarter last year.

Tesla CFO Zachary Kirkhorn said on the Wednesday earnings call that gross margin "remained healthy" after a modest decrease from the first quarter's 19.3 percent. Tesla's biggest price cuts were in January.

Tesla's industry-leading margins have allowed it to slash prices and increase sales incentives while still remaining highly profitable. That has put pressure on automakers such as Ford and GM as they prepare for the EV transition. Both automakers are losing money on their EVs and are expected to do so for years.

Ford cut the price of its Mustang Mach-E crossover, which competes with Tesla's Model Y, following the Tesla price cuts earlier this year. And on Monday Ford announced a Ford F-150 Lightning pickup price reduction. Ford had raised prices on the pickup, most recently in March.

Ford's Lightning pricing announcement came just days after Tesla announced the start of production on its Cybertruck pickup after first showing the vehicle publicly in 2019. Chevrolet also recently started limited production of its Silverado EV.

Tyson Jominy, vice president of data and analytics at J.D. Power, said Ford's price action on the Lightning is likely unrelated to the Cybertruck announcement.

But Ford, like Tesla, has been willing to adjust EV prices to spur demand.

"The timing of the Lightning price cut announcement seems auspicious on the surface, but it was likely only coincidental that Cybertruck started production over the weekend," Jominy said in an email to Automotive News. "An action of that magnitude cannot be decided and implemented in a weekend."

In fact, the Lightning's biggest competitor comes from another EV maker — Rivian, with its R1T pickup. Sales numbers for the first half of the year show Rivian making some progress against the Lightning, which remains the EV pickup leader.

"Rivian has been ramping up production and was directly in Lightning’s rearview mirrors," Jominy said. "Slow production of F-150 Lightning meant R1T was challenging Lightning for segment sales leadership. This action will likely put that challenge to bed."

Automotive analysts say that while Tesla is squeezing rivals on price, it's early going for legacy brands when it comes to the EV race. Most are likely to use incentives rather than price cuts to spur demand.

"You might play with your pricing and play with what sort of incentives you can offer through the end of this year on a specific vehicle for a specific situation, but I don't know if that means you change your overall strategy at this point in time," said Stephanie Brinley, principal automotive analyst at S&P Global Mobility.

Musk addressed the upcoming Cybertruck on the earnings call, predicting brisk sales once the automaker reaches volume production next year.

"Demand is so far off the hook, you can't even see the hook," Musk said. "So that's not really an issue."

"I do want to emphasize that the Cybertruck has a lot of new technology in it," he added. "It does not look like any other vehicle because it is not like any other vehicle."

Musk did not address Cybertruck pricing.

When the vehicle was first presented as a concept, Tesla said the base version would sell for just under $40,000, excluding shipping. Since then, Musk said the base price would be higher, and Tesla removed pricing for the three trim levels from its website.

Earnings results

Tesla's stock price was mostly flat in after-hours trading Wednesday after the automaker met Wall Street expectations.

Net income for the second quarter surged 20 percent to $2.7 billion while total revenue, including its solar business, gained 47 percent to $24.9 billion, Tesla said in its quarterly report.

Vehicle production rose 86 percent to nearly 479,700 vehicles while deliveries rose 83 percent to 466,140.

On an adjusted basis, Tesla earned 91 cents per share. Analysts had expected a profit of 82 cents per share, according to Refinitiv IBES data.

Reuters contributed to this report.