The DCAS Phase 1 Restrictions Will Only Allow Tesla To Rollout A Degraded FSD Version In The EU In Q1 2025, Limiting Its Uptake For Now

Tesla shares are rocketing higher today in the aftermath of an ambitious FSD rollout plan in China and the EU in the first quarter of 2025. Yet, Tesla's exponentially growing FSD-related prowess is about to face a significant regulatory inertia, which will likely limit the upside for the EV giant.

Tesla has now announced its FSD release roadmap for the next few months. Notice the arrival of the FSD version 13 in October and the concurrent unlocking of the ability to reverse in FSD. This is a testament to Tesla's accelerating computing power that is now feeding into an expedited rollout of enhanced capabilities.

Of course, the critical development remains the Q1 2025 rollout of FSD in the EU and China. This development has spurred Tesla to a ~6 percent gain in early morning trading. Moreover, around $31 million in net call premium has already changed hands.

Yet, despite its ambitions, Tesla faces regulatory hurdles in rolling out the latest FSD capabilities in the EU, which has now adopted the UN-led Driver Control Assistance Systems (DCAS) regulations. Critically, the phase 1 of the DCAS framework, which is expected to enter into force in January 2025, does not allow for autonomous driving:

"To avoid driver overreliance on such systems, the regulation stipulates that DCAS shall be designed to ensure that the driver remains engaged with the driving task. The driver’s hands must remain on the wheel and the system shall monitor the driver’s visual engagement with the road, triggering alarms after 5 seconds when it detects that this is no longer the case."

Of course, negotiations on the phase 2 of the DCAS are still ongoing, with the next workshop due on the 09th of September. Consequently, it seems much more likely that Tesla will rollout only a degraded version of the FSD in the EU in Q1 2025, which is likely to limit its uptake.

Bear in mind that each 5 percent rise in FSD uptake increases Tesla's EPS by $0.05 per share, according to Future Fund's Gary Black.

On the other hand, Tesla is likely to face a much more conducive environment in China, where Mercedes has just received a formal approval to start testing its bespoke Level 4 Advanced Driver Assistance System (ADAS), which allows autonomous driving without human oversight for extended periods. For comparison, Tesla's FSD is currency ranked at Level 2.

About the author: Writing is my one incontrovertible passion. Over the past six years, he has authored over 2,200 distinct articles on financial and tech-related topics, spanning nearly 1 million words. And he has been a member of Wcctech mobile team since 2025. As an alumnus of the University of Toronto, Rotman Commerce Program, I bring nuance, in-depth knowledge, and a unique perspective to every topic that I cover. When I'm not writing, I'm traveling the world, exploring hidden confectionaries and restaurants as an aspiring food connoisseur.

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