Tesla’s hidden BILLIONS of profit. The insane potential of the NEW Tesla App Store!
Recent Breaking News about the Tesla App Store has revealed the huge potential that comes with this new function. We talk about the INSANE amount of money this will generate for Tesla and more.....
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The Apple app store, is one of the most profitable revenue streams in history, generating as much revenue and profit than companies like Johnson and Johnson and UPS .. In this article, I cover the recent breaking-news about the release of a Tesla App store, how the Apple app store works, and how by 2030 the Tesla App store could generate $13 billion in pure profit..
Now lets talk about what the Tesla App store WILL BECOME BY 2025, because itis very shocking…
Apples “money printing” App-Store 🍎
Currently the Apple app store generates around $85 billion in revenue per year. Of which about $66.3 billion is pure profit, that is an insanely high profit margin of 78%!
We cannot understand how impactful a potential Tesla app store will be, without actually knowing how the biggest app store in the world works. So before we dive into the billion dollar profit scenario of aTesla app, lets look first at the billion dollar profit example of the Apple App store.
Unvealed nearly 15 years ago now, the Apple app store has changed the way we interact with out phones permanently. With the click of a button users can now install Netflix to watch their favourite shows, install productivity applications to help with work or even purchase games to keep you entertained whilst you sit in the bus, train or even…. your car. (See where I’m going with this?). The Apple app store has long been a core component of Apples growth. Doing nearly $90 billion in revenue per year which is nearly equal to the total revenue generated by companies like UPS, Target and Johnson & Johnson. So how does this money-printing machine actually work?
Apple has different revenue splits with their developers based on the TYPE of subscription/purchase. In the 2021 during the court-case against Fortnite maker Epic Games, Apple was willing to say in the courtroom that Apples commission, the rate that it charges developers to host an app on its store, has declined over time.
“The company’s 30% commission does not apply to everyone, and 85% of the apps are free, with no commission” Cook said.
Ok, but what fee actually applies for what type of purchase? Let’s break it down quickly. There are 4 main comissions that apple takes:
30% of all one-time payments
The Apps that make the most money on the app store tend to be video-games which aren't subscription based purchases and thus because these are one-time purchases Apple colects 30% of the revenue.
15% of subscription based payments
Apple only takes 15% of the payment if there is a subscription involved. Apple takes 30% off the first subscription payment and then collects 15% of all payments afterwards until the subscription is cancelled (if it is cancelled).
Purchases outside the app-store.
Apple takes no Revenue from apps where the purchases/subscriptions happens outside of the App store. For example, you purchase a Netflix subscription via the internet, not the app store.
Free applications
Lastly we have Free apps which account for 84% of all available apps, So Apple receives no comission from supporting, hosting, and distributing these apps as no payments occur in these apps so ofcourse Apple takes no comission.
Given this information we now have a better understanding of how the Tesla app store could function with regards to revenue. So now that you’ve passed the course on, “WTF is the Apple app store“ let’s go to the next topic and confirm the legitimacy and accuracy of the recent breaking Tesla-App store news..
Why the Tesla App Store rumours are legitimate.. 🧪
The updated news that Tesla may be launching an App store was sparked multiple times in 2020, 2021 and even earlier in January this year. However this time it is different, the the recently rumoured news that Tesla may be launching an appstore of its own gained significant traction late sunday night, when multiple respected accounts confirmed , that they too had heard, the rumour that a Tesla app store is coming soon. This all started after @Teslascope on twitter released the following statement:
In subsequent tweets, it was mentioned by Teslascope, that;
“The anticipated release was this year around Q3, although should be fully baked before deliveries of Cybertruck. Been in the works for almost a year now.”
This is reinforced by a leaked patent Tesla had applied for regarding the Cybertruck, in which there appears to be some functionality similar to an App-store feature.
Interestingly enough this leak appears to be backed up by the fact that there is literally a Tesla App store website page (apps.tesla.com) which mysteriously you cannot log into yet, but the page clearly shows a warning that states download to use ‘Tesla Apps’.
These facts all seem to point towards the obvious release of a Tesla App store, but the question you are asking is when will it be released?
I asked respected Tesla Investor Sawyerr Merrit about the validity of these rumours and when we may expect a Tesla app store to be launched and he said;
“Again, the rumor is just that, a rumor, but I do think Tesla launching an app store of their own makes sense and is a natural step forward for the company. I don’t expect it this quarter or even the next. My guess is we would probably be looking at late 2022 at the earliest.”
This would align with Tesla’s 2022 “product-roadmap“ update in which Elon musk repeatedly mentioned that 2022 will be the year of software. In the recent Q4 earnings call he stated multiple times that
“Everything pales in comparison to the value of a robotaxi or full self-driving,” When Level 4 Autonomy is reached, you’re going from an asset that has a utility of 12 hours per week as a passenger car “to maybe around 50 or 60 hours a week, so a (five times) increase in the utlity of the asset” Musk said.
We know Elon is super bullish on FSD, so with Saywer’s estimate about a Tesla launch in late 2022 this would allign well with the continious improvements we’ve been seeing with FSD as we approach full self driving vehicles in the near-future.
Twitter user StatsTeslaApp believes that Tesla will allow “third-party developers to create apps that show up alongside current apps that are provided by Tesla (eg, Spotify, Tidal, messages, etc). For example, some of the functionalities included in apps like (the) Stats app for Tesla which is currently (only available) for iOS/iPadOS can be ported to an app in (the) Tesla App Store. For instance, the battery health functionality of Stats app is a good candidate.“
The possibilities for a Tesla app store are endless. Now let’s look at…
Let’s now look at how the Tesla software and apps are currently integrated, and how they actually already have some sort of subscription that could paint the picture of how a future Tesla app store may work and how much money that will generate…
How Tesla’s current software works
Currently the functionality of the Tesla touch-screen display is far from its potential. At the moment you have the driver features, such as being able to map out your journey, see where super-chargers are located you also have limited games available and apps like Netflix and spotify available. Interestingly enough, Tesla themselves have to adapt these apps as there isn’t any public developer kit for companies to port their apps to the Tesla system. This would need to be changed in the future if an App store would be introduced, and the difficulty of creating this is potentially one of the reasons an app store hasn’t been released yet. So at the moment the Tesla apps are great and fun but not yet the ground-breaking profit machine it will become.
Currently there are nearly 3 million Tesla vehicles on the road, by the end of 2022 that number will approach 4.5 million (Assuming 1,5million vehicles delivered). Why is the number of Tesla’s on the road important?
Elon musk explained this quite succinctly on the lightning podcast in 2019, keep in mind at the time Tesla had less than a million vehicles on the road.
“In order for it to be worthwile for somebody (a company) to write (develop) an app, there has to be enough of an install base (userbase) to warrant the effort. Even if you are going to port something, it's still got to be worth the effort. As our number of vehicles grow, it starts to potentially make more sense to develop games and other applications for Tesla. We just need a lot of cars.”
Tesla ofcourse doesn’t need the app store, but introducing the app store would produce Apple like profits and increase Tesla’s already strong moat. You can bet that legacy automakers who are struggling to replicate Tesla’s success with EV’s will similarly struggle to introduce an app store. Remember, Tesla is a tech company. A Tesla app store becomes just another one of the 100 selling points for the Tesla brand, whilst strengthening the Tesla ecosystem.
It is important for you to know that Tesla already has alot of functionality in their display compared to competitors. You can play graphically intense games like The Witcher on a Tesla but not its competitors.
Sawyer Merrit believes that “I would expect them to develop and release their own apps on the app store. They are developing so many things in house. In terms of what apps Tesla could create, I think it would be a brand spectrum from games, maybe safety tracking, fun car quirks, subscription based apps, etc.”
Funnily enough Tesla are actually already providing alot of functionality for only $10 a month with their Premium Connectivity subscription that you can purchase. So what is this subscription and what does it mean for a Tesla app store?
Premium Connectivity - A sign of things to come?
Tesla already provides many features that help set-up their ability to create an app store. Late in 2020 Tesla launched Premium Vehicle connectivity. It allows users to stream music or videos, to browse the internet or to see live traffic. This feature is often overlooked, it is a strong source of powerful recurring revenue and is one of the many ways Tesla is increasing the potential revenue of their vehicles. Tesla has introduced this feature such that the company can offer similar services ot its customers. Tesla already has entertainment with Tesla theater and Tesla arcade which could become very similar to Apple TV+ and Apple arcade. This Premium Connectivity package provides alot of features you might envision are already "apps" on the Tesla system.
Currently with the Premium Connectivity you get access to the following features
Tesla can either introduce similar features and sell them seperately on their app store, or they can increase the pricing of these features. Again Sawyerr Merrit is kind enough to share his thoughts, believing that Tesla will increase subscription costs;
“Price(s) will likely go up as the feature list and functionality increases. As more features become available, they (Tesla) could have various subscription tiers so people can choose the features they want instead of having to pay for everything or get nothing. Subscription based things will likely bring a lot of revenue in for Tesla. This is a model Apple has been adopting for years, and it has been very successful.
The already existing subscriptions such as FullSelfDriving (FSD) or the previously mentioned Premium Connectivity subscriptions provide a great foundation point for Tesla to introduce more features, in the future these subscriptions may all be managed through the Tesla App store. But, OK, how would a Tesla app store look like? Function? How much money would it generate? Let me answer those 2 important questions….
How the Tesla App Store will work
In the not-to-distant future, Tesla’s will be driving themselves. When this happens, a Tesla app store will mean Tesla does less work creating application integrations themselves, has more applications to offer users, will earn significant comission on in-Tesla-app purchases and will generate a win-win-win scenario, a win for Tesla, the consumer and the app developers.
There are some problems with the current Tesla software that a Tesla App store could address and fix, namely the fact that currently the spotify version in a Tesla is missing features compared to the online version of Spotify. Tesla has to put in work to integrate these music streaming services and must manually port games like the witcher to their vehicles. By opening up their Software Developer Kit (SDK) to developers, the experience will improve greatly for users as developers will make the apps themselves. Thus, for example, Spotify can have a dedicated team for Spotfiy in Tesla, Tesla approves the app and the overall experience thus increases. With the possibility of an FSD future, we know that these developers will definitely want to create Tesla versions of their apps. Tesla could also introduce and allow paid applications such as games, productivity apps or a screen-mirroring app or even stock-trading apps your Tesla will virtually become a moving smart phone.
The interest for developers to create apps is already really large. Twitter user StatsTeslaApp who is the developer of the famous Tesla Statistics said he was interested in developing a portable version of his Tesla Stats App, he said "
“Most likely, yes (I would create a Tesla version of the app). All the statistics shown in the Stats app (eg, efficiency, phantom drain, battery health, battery capacity, etc) are good candidates for the Tesla AppStore“
Specifically, the features StatsTeslaApp believes to be the most important to make the app store useful and viable are such that;
“Tesla should provide access to the current Tesla API and it would be great if Tesla can also provide access to some of the information that is currently provided only on the CAN bus (eg, battery temperature and battery voltage)”
Now ofcourse, there is severely limited capability of the Tesla App store, IF, Full-Self-Driving isn’t achieved. The Average American spends about 1 hour per day driving their car. That is about 6% of your day assuming you sleep 8 hours. Now without FSD the Tesla app store becomes much less important, as you simply will be using it less. Currently the Tesla Apps are nearly all used when the car is idle or stopped, or for the people (children most likely) in the rear seats. If FSD is achieved the use of Tesla Software and Apps increases dramatically, and so thus would the demand for Tesla apps. A 10 hour car journey instead of being tedious, becomes a 5 hour Netflix session and 5 hours of work and zoom calls, the productivity and usage of the car changes dramatically. Currently the Tesla FSD software is priced at $12,000, Sawyerr Merrit shares his thoughts on the future pricing of FSD.
“I think for now Tesla will stick with its $2k price increase increments at a time, so maybe $14k by late this year (2022) or early next year potentially. Eventually I could see FSD as a whole costing tens of thousands. it will be the main feature of the car. I think it will become so useful and increase safety quite a bit to where you wouldn’t want to buy a car without it”
If this ends up being the case, you can imagine the value of the Tesla App store will be significant because of that 1 hour everyday in which you no longer need to pay attention to the road and can focus on other things, like entertainment or work.
Speaking about the value of the Tesla App store, let’s jump into some projections on the true financial potential of a Tesla app store by 2025. The math is shocking…….
The Maths - The Value of the Tesla App Store
Obviously this section wil not be 100% accurate, but it will provide you with a phenomenal understanding of the implications that FSD and a Tesla App store would have for the company. For this section we will not look at the value of FSD but instead at the value of a Tesla-App store, assuming that Level 4 Autonomy has been reached. (So again, that 1 hour of driving everyday frees up time for entertainment or productivity)
The Apple-App-store generates alot of revenue, partially because the Iphone has billions of users. So we must first look at and project the amount of Tesla’s on the road in 2025. In 2025 Tesla will have sold a cumulative of 10.6 million vehicles assuming 35% YoY growth. (Note, Tesla is likely to hit 50% YoY growth so this is slightly pessimistic).
According to multiple sources, Apple generates, per user, a revenue of about $138 via Apple app store purchases/subscription comission in 2019. The Average purchase price (cost of the average transaction) is about $0.80 cents on the app store. Tesla can already run and offer users to play games like The Witcher which costs about $34 usd at the moment on PC.
So we already know that Tesla will be able to offer more intese applications so the average purchasing price, or cost of the average transaction, on The Tesla App store will be significantly higher than that of the App store. The most popular bought game on the App-store is Minecraft which costs $7 to install. That is thus 8.75 times the average App-store transaction. So for our Tesla example we are safe to assume that given the average price of a paid application (like Minecraft), that it will be proportionate to be about 8.75 times more expensive than the average Tesla app store transaction. Minecraft on the PC costs about $27, so about 4 times as expensive as on the iPhone.
Now, this is a HUGE assumption but, we now assume that the average amount spent per year on the Tesla-App-Store per user, will thus also be 4 times the average amount spent per user in the Apple App store, so:
Average amount spent per year on Tesla Appstore
(Average amount spent in the Apple App store in 2019 by paying customers) * (4) = The Average Amount spent in the Tesla App store
Which is:
138 * 4 = $552 per year
[Ignore this if you’re reading online. If you’ve received this article via email, please visit the online version to view the entire article, due to the length of this in-depth article the final 1/4 can only be viewed online]
$552 per year doesn’t seem unreasonable as we know that owning an EV saves users hundreds of dollars per year on gas, so the $552 per year doesn’t seem crazy. Especially if the purchase of a video game through the Tesla-app store carries over to your other accounts like on your computer or playstation. Ok, so we now know the average amount spent per year on Tesla apps per average paying user. Now it is important to know that only about 5% of Apple users spend money on the app store. Now because I believe the Tesla app store will simply have so much more functionality, more games, better games, more features for work, relaxation and productivity. I can almost guarantee that more Tesla users will spend money on the Tesla app store compared to to the Apple app store. We can look at the current $10 monthly Premium connectivity subscription as an example for what the take-rate might be for users paying in the app store. Twitter user StatsTeslaApp believes that;
“I do not have numbers based on any measurement, but I would guess is more than 80% (of Tesla owners have bought the Premium Connectivity”
Similarly we can look at the current amount of FSD users, and as Sawyerr Merrit explains the current % of Tesla users who have purchased FSD (remember it costs now $12,000!) is 7.3%.
“There really isn’t any firm data on what the take rate is for PC (Premium Connectivity). It’s certainly significantly higher than the FSD take rate though, which is estimated to be 7.3% globally (based on @TroyTeslike estimates). As the feature list grows though, more people will subscribe.”
This is insane, Tesla FSD costs significantly more than an app store purchase, and already it is estimated that 7% of Tesla users have bought/subscribed to FSD. Thus in our assumption we will assume that 60% of all Tesla vehicles will partake in the Tesla App store.
By 2025, there will be, as previously mentioned, baout 10.6 million Tesla’s on the road. So 60% would equate to about 6.36 million Tesla vehicles.
Using this number, we now know how many users will spend money in the app store, and we previously already calculated that the Average amount spent in the App-store by users will be roughly $552 per year. So we can now calculate the amount of revenue per year that a Tesla app store would generate in 2025 and beyond.
2025 App store revenue = 552*6,360,000
Thus using these numbers, I estimate it is possible that in 2025 a Tesla App store generates…..
Tesla App Store generates $3.51 billion in 2025
$3.51 billion per year. Of which, (using 78% profit margins) $2.738 billion is pure profit.
This would provide a value of 2,738,000,000 / 1,033,507,611* = $2.64 per share in profit, using a P/E ratio of 50 that means a Tesla App store could be worth $132 per share in 2025. (* note, As of January 31st, 2022 there are a total of 1,033,507,611 shares outstanding of Tesla stock. )
Profit and Revenue projections (The final formula)
0.6 *(Cumulative number of Tesla vehicles sold)*(552) = Revenue generated per year from the Tesla App store.
You can extrapolate this estimate into the future, you can see in the diagram below that again given the 35% YoY growth and the previous assumptions. You see here the data for Tesla App store revenue and profit per year.
You can see from the graph above that the estimates are staggering. And after having read this article you should be able to see the insane potential of the Tesla App store, and why the recent rumours are so promising! Now let me summarize for you the…
TLDR
⚙Tesla is currently working on their own App store.
🤑The Apple-App store currently generates $66.3 billion in profit per year.
👔With FSD, the Average american will have 1 hour to work/relax extra per day, time they don't have to spend driving anymore. This will increase productivity to new levels in the economy.
📈Tesla App store could generate $13.5 billion in profit by 2030.
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*Special thanks to all of those who answered my questions via Twitter!