Tesla (TSLA) shares jumped on Monday after reports that CEO Elon Musk had received Chinese approval to deploy the automaker’s Full Self-Driving (FSD) autonomous software in the mainland.
As the Wall Street Journal first reported, people familiar with the matter said that officials told Tesla during Musk’s 24-hour visit to Beijing over the weekend that they had tentatively approved FSD in the country.
Separately, Bloomberg previously reported that Tesla would use Chinese tech firm Baidu’s road map data to power FSD. Tesla had previously used Baidu’s map data for satellite navigation in its cars. Working with a Chinese company helped with regulatory approval by minimizing privacy and security risks, the reports said.
Tesla closed up 15.3%, reaching its highest level since March 1. Tesla shares are now up nearly 40% in the last four trading sessions.
While pricing for FSD in China has not been announced, in the US Tesla charges $8,000 upfront for lifetime use (up from $12,000) and $99 per month for subscription services.
Adding FSD functionality in China is a big deal for the automaker, not only because of the additional increase in sales, but also in terms of the competitive advantage it gives Tesla over rivals like NIO, Li Auto, XPeng, and even tech giants like Xiaomi getting started into the automotive market with its own semi-autonomous software.
“Tesla must remain at the forefront of innovation. They have to be the most technologically advanced solution,” China expert Leland Miller of China Beige Book told Yahoo Finance. “We have a saturated domestic market and a price war…” [Tesla] must remain at the top of the technological ladder.”
Tesla’s lack of FSD in its vehicles likely weighed on sales in China, where the latest tech features are at the forefront. According to the Chinese Passenger Car Association, Tesla’s share of the Chinese market fell to 6.7% in the fourth quarter of 2023, despite aggressive price cuts, from 10.5% a year earlier. Global Tesla deliveries fell to 387,000 units in the first quarter from 423,000 the previous year.
Still, receiving preliminary approval for FSD and a data deal with Baidu are two big wins for Tesla.
“Musk’s obtaining FSD approval in the important Chinese market is, in our view, a turning point for the Tesla story,” Wedbush analyst Dan Ives said in a note to investors, further claiming it was a “home run” for Musk been. “While the long-term valuation story at Tesla hinges on FSD and autonomous vehicles, a key missing piece to this puzzle is Tesla making FSD available in China, which is now a done deal.”
Tesla’s focus on autonomous driving and even its robotaxi future are seen as long-term catalysts for the company, which has seen a turnaround and a significant decline in its shareholder class in the last few weeks alone.
A key part of the development of Tesla’s AI-powered autonomous software is the collection of massive amounts of data that is fed into the software model. According to Ives, Tesla has had to store its data in China since 2021 due to a regulatory requirement.
If Tesla receives further approvals to migrate this data in China to its U.S.-based servers, it will “accelerate the training of its algorithms for its autonomous technology globally,” Ives said. Additionally, FSD users based in China may be more inclined to opt-in and use the service more often as the government has promoted self-driving in various locations, providing Tesla with more data to improve its FSD software.
Pras Subramanian is a reporter for Yahoo Finance. You can keep following him Twitter and further Instagram.
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