Elon Musk-led Tesla has overcome significant regulatory obstacles that have long prevented it from introducing its self-driving software in China, setting the stage for a positive outcome from Elon Musk‘s unexpected trip to the U.S. automaker’s second-largest market. According to an individual familiar with the situation, Musk, Tesla’s CEO, arrived in Beijing on Sunday and was anticipated to discuss the deployment of Full Self-Driving (FSD) software and permission to transfer driving data overseas.
On Monday, two independent sources informed Reuters that Tesla had reached an agreement with Baidu to utilize the Chinese tech giant’s mapping license for data collection on China’s public roads, which they described as a crucial step for FSD to be introduced in the country. Additionally, a leading Chinese auto association announced on Sunday that Tesla’s Model 3 and Y cars were among the models that it had tested and found to be compliant with China’s data security requirements.
Data security and compliance have been the primary reasons why the U.S. electric vehicle manufacturer, which introduced the most autonomous version of its Autopilot software four years ago, has yet to make FSD available in China, its second-largest market globally, despite customer demand. Since 2021, Chinese regulators have required Tesla to store all data collected by its Chinese fleet in Shanghai, preventing the company from transferring any data back to the United States.
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The person said that Musk is seeking approval to transfer data collected in the country abroad to train algorithms for its autonomous driving technologies. Tesla has not responded to requests for comment. Wedbush equity analysts described the surprise visit as “a major moment for Tesla.”
Xpeng, Huawei Technologies, and other Chinese competitors have been working to gain a competitive edge over Tesla by introducing comparable software. According to retired journalist Hu Xijin, Tesla is the sole foreign-funded car manufacturer to adhere to China’s data compliance standards, potentially allowing Tesla vehicles to access government and state-owned company premises across the country.
“This is not only a breakthrough in China, but also a significant demonstration for the entire world in solving data security issues,” he said.
For years, Tesla cars have been prohibited from entering Chinese military complexes due to security concerns related to the cameras installed on the vehicles. They have also been barred from locations hosting important political events, such as the ruling Communist Party’s annual summer leadership conclave in 2022.
Tesla’s shares have dropped by nearly a third since the beginning of the year, as concerns about the EV maker’s growth trajectory have increased. The company recently reported its first quarterly revenue decline since 2020, when the COVID-19 pandemic impacted production and deliveries. Musk announced that Tesla would introduce new, more affordable models using its existing EV platforms and production lines, as well as a new “robotaxi” with self-driving capabilities, which he plans to unveil on August 8.
Industry experts believe that China’s complex traffic conditions, which include more pedestrians and cyclists compared to many other markets, provide a greater variety of scenarios that are crucial for training autonomous driving algorithms at a faster rate. Wedbush analyst Dan Ives noted that if Musk can secure approval from Beijing to transfer data collected in China abroad, it would be a “game changer” in terms of accelerating the training of Tesla’s autonomous technology algorithms globally.
During his trip to China, Musk met with Chinese Premier Li Qiang, who commended Tesla’s success in the country as an example of effective U.S.-China economic and trade cooperation. Musk also attended the ongoing Beijing auto show. Additionally, Robin Zeng, the chairman of Chinese battery giant CATL, a key Tesla battery supplier, was seen visiting Musk’s hotel in Beijing on Monday, although it has not been confirmed if the two met.
