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Tesla Brings Back a Product That May Solidify Its Dominance

The manufacturer of premium and high-end electric vehicles became the most profitable American carmaker in the first quarter of 2022.
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Tesla  (TSLA)  leaves only crumbs to its rivals.

The automotive industry disruptor does not share the accolades. And even less the place of darling among investors and consumers wanting to bet on or buy an electric vehicle. 

Basically, Tesla and its charismatic and whimsical CEO Elon Musk don't want to be disrupted. They are the disruptors and want to stay that way.

As legacy automakers and upstarts assemble their weapons to take it on in every possible terrain, the Texas-based vehicle maker is trying to establish an important divide with them on what also matters most: making money. .

As a reminder, Tesla became the most profitable American automotive company in the first quarter. 

The firm reported a first quarter net income of $3.31 billion. That's a 658% jump from the first quarter of 2021. At the time, Tesla had earned $438 million.

By comparison, GM  (GM)  recorded a net profit of $2.93 billion in the first quarter, down 3.04% compared to the first quarter of 2021. 

The Return of EAP

Ford  (F) , for its part, has gone into the red since the company led by Jim Farley has announced a net loss of $3.1 billion from January to March. In the first three months of 2021, the maker of the hugely popular F-150 pickup had posted a net profit of $2.3 billion.

Basically, Tesla is no longer just an automotive group valued at $723.12 billion as of time of writing because investors believe in the promises of innovations made by Musk but because the firm makes money and should be able to distribute dividends short term.

But Tesla does not want to be satisfied with it since Musk's company has just brought back its Enhanced Autopilot (EAP) in North America. 

EAP is a driver assistance system which is sold at a price of $6,000. This system allows Tesla vehicles to perform various maneuvers ranging from changing lanes, auto parking, etc.

The system "actively augments auto lane change by providing guidance to the driver to transit motorway’s on-ramp to off-ramp, including suggesting lane changes and navigating interchanges," Tesla said on its website.

The big difference with Full Self-driving (FSD), the company's most advanced driver assistance software, is that EAP doesn't identify stop signs and traffic lights and doesn't slow the car to a stop on approach for example.

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But, the advantage of EAP is that it allows Tesla to appeal to customers who find FSD too expensive. 

FSD costs $12,000.

Indeed, it all started with a post from a Tesla customer on Twitter addressed to Elon Musk. This client complained about the steep price of FSD and asked the CEO if he could not reintroduce EAP in North America as he had just done for Australian and New Zealand consumers.

"Tesla needs to bring this back for everyone, FSD is too expensive for what you get," the user wrote on June 17, with a link to an article reporting that EAP was now available in Australia and New Zealand. "Sell FSD as a second tier above EAP and still include basic AP with every car @elonmusk."

"Ok," Musk responded.

The feature is available for new vehicles as well as for vehicles already in circulation.

News That Delights Tesla Fans

Tesla offered two driver assistance system options until 2019. The first, Autopilot, and the second, EAP. But as of 2019, the automaker had introduced FSD and decided to make Autopilot a standard feature in all Tesla vehicles. The firm had then ceased to offer EAP.

Reactions to the return of EAP to North America are particularly positive. Many Tesla customers and potential customers see it as a win-win formula. On one side, the customer has a cheaper option and Tesla on its side has the opportunity to improve its profitability by tapping on a large reservoir of customers.

"Nice, good one Trevor you just made Tesla all sorts of money," one Twitter user commented.

"Agreed," another user added. "A tiered system not just from a price perspective but also will allow the end user to modify based on their needs rather than under or over by, and it’s a win for Tesla from data mining to profits."

"I’d immediately get EAP if it were to come back here. FSD is too expensive, but EAP would give what basic AP is missing," another Twitter user commented.

The automaker has been offering EAP for a few days, TheStreet found. A consumer who orders, for example, a Model 3 sedan, Tesla's entry-level vehicle, now has the choice between EAP and FSD.

This is also the case for the other models: the luxury sedan Model S and the SUV Model Y and Model X.

EAP has the potential to help Tesla improve its margins as industry prices are likely to rise further due to supply chain disruptions, chip shortages and soaring prices for raw materials like nickel.