Source | YuanAuto

The second-quarter financial results for 2026 have just been released by Tesla, bringing both good and bad news. The positive aspect is that the quarterly revenue soared to an all-time high of $28.24 billion. However, the not-so-positive news is that the net profit, calculated under non-GAAP metrics, saw a decline both year-on-year and quarter-on-quarter, reaching a 'mere' $1.153 billion.

When calculated using GAAP metrics, Tesla's net profit for the second quarter of 2026 stood at $1.114 billion, marking a 5% decrease year-on-year but a significant 133.5% increase quarter-on-quarter.

It is evident that Tesla, despite its global presence in over 50 countries, grapples with the same challenge as most domestic automakers: the difficulty of generating substantial profits solely from car manufacturing and sales. According to the financial report, Tesla delivered over 480,000 new vehicles worldwide in the second quarter of 2026, a 25% increase year-on-year. Nevertheless, both net profit and overall gross margin experienced a year-on-year decline.

Tesla has outlined four key factors in its financial report to explain the fluctuations in profitability:

• Escalated operating costs due to AI and other R&D initiatives, SBC (Standard Business Conduct) expenses, including the 2025 CEO performance award, and SG&A (selling, general, and administrative) expenses.
• A reduction in revenue from carbon emission credits.
• A decrease in the average selling price of vehicles.
• An uptick in energy warranty-related costs stemming from supplier battery issues.

In essence, Tesla is not immune to the challenging conditions prevalent in the automotive industry. Yet, when compared to its competitors, Tesla demonstrates a higher level of proficiency. The second-quarter report highlights that selling assisted driving features has emerged as the most promising revenue stream for the American automaker.

"As of the second quarter, Tesla's global paying user base for assisted driving has surged to 1.48 million," according to information provided by Tesla China on July 23. The number of paying users for Tesla's FSD (Full Self-Driving capability) experienced a significant uptick in the second quarter, with 55% of new vehicles delivered in North America subscribing to FSD. Furthermore, among Tesla's 1.48 million global FSD paying users, 45% are subscription-based.

Considering the current monthly subscription price of $99 for Tesla FSD in North America and the volume of FSD subscribers as of the end of the second quarter, Tesla's revenue from assisted driving feature subscriptions alone approaches $200 million per quarter. Given that Tesla's global sales are increasing at a rate of 300,000 to 500,000 vehicles per quarter, and FSD is making rapid inroads into automotive markets, including China, it is anticipated that the $200 million quarterly revenue mark is merely the beginning for Tesla's FSD revenue potential.

When juxtaposed with Huawei's ADS (Advanced Driving System), the enviable nature of Tesla's FSD business becomes even more apparent.

As one of the most esteemed assisted driving solution providers in China, Huawei's ADS charges 15,000 yuan (post-automaker subsidies) for its comprehensive suite of assisted driving features, epitomized by urban navigation-assisted driving. It is noteworthy that Huawei's ADS is currently the only assisted driving solution in China that requires vehicle owners to pay for activation. In contrast, most other automakers' self-developed solutions or supplier solutions typically offer the first owner 3-5 years of usage rights, with a select few granting lifetime free usage rights.

A straightforward calculation reveals that at $99 per month (approximately 670 yuan) for Tesla's FSD, once the cumulative subscription time surpasses 22 months, the amount paid by vehicle owners for assisted driving will exceed that of Huawei's ADS, which commands the highest price in China.

Moreover, if we conservatively estimate based on a 5-year usage cycle per vehicle, the subscription fee for Tesla's FSD will approach $6,000. Given Tesla's latest automotive gross margin of approximately 16.3%, the gross profit from selling a Tesla Model 3 in the United States is also roughly $6,000.

From this vantage point, Tesla is pioneering a profit model that is unprecedented in the automotive industry, with aspirations that surpass the traditional realm of car manufacturing and sales.

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