GOOG Alphabet Inc

By Tim Higgins 

Tesla Motors Inc. said it plans to charge buyers of its newest cars $8,000 to activate autonomous-driving technology, hinting those who do would be able to offset the cost through a ride-hailing network similar to Uber Technologies Inc. and Lyft Inc.

The $8,000 price covers the software to enable a new hardware option, called Full Self-Driving Capability, which will cost $10,000 if purchased separately from the vehicle.

The autonomous-driving software still needs to be validated, and regulators must approve it, the company said.

Several companies are racing to develop fully self-driving cars, and some are betting that ride-hailing services will be the first commercial use of autonomous vehicles. Tesla's price for autonomous driving activation sets a benchmark for car manufacturers that aim to market self-driving cars including BMW AG, Ford Motor Co. and General Motors Co. Alphabet Inc.'s Google and Uber are also testing self-driving cars on public roads.

"This is the first time somebody has put a price -- a consumer price -- toward what that feature set might cost," Stephanie Brinley, an industry analyst with IHS Markit, said. "It sets a level of expectations."

The description of Full Self-Driving Capability confirms Tesla is planning to launch a ride-sharing business. Its website noted that "using a self-driving Tesla for car sharing or ride hailing for friends and family is fine, but doing so for revenue purposes will only be permissible on the Tesla Network, details of which will be released next year."

Tesla didn't say how it plans to limit its self-driving vehicles to its own ride-hailing network. However, its statement to potential customers highlights a shift in the ride-share industry as Uber seeks to replace car ownership with on-demand transportation, and it underscores the potential benefit in a ride-hail company developing its own autonomous cars.

"Any smartcar manufacturer sees that as a possibility and is also thinking about their own on-demand, autonomous transportation network," said Arun Sundararajan, a professor at New York University who has written about the sharing economy. "In the early stages, allowing your cars onto someone else's network reduces your ability to use your service."

Tesla buyers who use the network "could potentially pay back your lease or the cost of the car by doing so," said Tasha Keeney, an equity analyst with ARK Investment Management LLC.

Customers who don't want full self-driving capability could spend $5,000 for an enhanced version of the company's Autopilot semiautonomous system that will also use the new hardware.

Chief Executive Officer Elon Musk said on Wednesday he expects to deliver within two to three months software running on the new hardware that would be equivalent to Autopilot. After that, the software would be updated gradually to full autonomy. He aims to demonstrate a fully autonomous trip across the country by the end of 2017, he said.

The hardware that will enable Tesla cars to drive themselves includes front-facing radar, 12 sonar sensors, and eight cameras. The previous semiautonomous hardware included one camera. The additional cameras give the vehicle 360-degree visibility of objects up to 250 meters away.

Data collected by the cameras and other sensors is processed by onboard computer that has 40 times more power than the previous generation, according to Tesla. Chip maker Nvidia Corp. is providing its Titan graphics processing unit to help power the new system.

Mr. Musk in July laid out his vision of self-driving cars forming the basis of a ride-hailing network as part of the company's long-term plan in July.

"Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not," Mr. Musk wrote in July.

(END) Dow Jones Newswires

October 20, 2016 19:14 ET (23:14 GMT)

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