Shares of Tesla (TSLA) soared Monday following reports that CEO Elon Musk had won Chinese approval to deploy the automaker’s Full Self-Driving (FSD) autonomous software on the continent.
As first reported by the Wall Street Journal, people familiar with the matter said officials told Tesla they had tentatively approved FSD in the country during Elon Musk’s 24-hour visit in Beijing this weekend.
Separately, Bloomberg previously reported that Tesla would use street-level map data from Chinese technology company Baidu to power the FSD. Tesla previously used Baidu map data for satellite navigation in its cars. Working with a Chinese company helped secure regulatory approval as data privacy and security risks are minimized, according to reports.
Tesla closed up 15.3%, reaching its highest levels since March 1. Tesla stock is now up more than 30% over the past four trading sessions.
Although the price of FSD in China has not been disclosed, in the United States, Tesla charges $8,000 upfront for lifetime use (up from $12,000) and $99 per month for FSD services. subscription.
The addition of FSD functionality in China is a big deal for the automaker, not only because of the added incremental revenue, but also in terms of the competitive advantage it gives Tesla against competitors like NIO, Li Auto, XPeng and even tech giants like Xiaomi, which is entering the automotive market with its own semi-autonomous software.
“What Tesla needs to do is stay 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 an ongoing price war… (Tesla) must remain at the top of the technology ladder.”
The lack of FSD in its cars has likely weighed on sales in China, where the latest tech features are prioritized. According to the China Passenger Car Association, Tesla’s share of the Chinese market fell to 6.7% in the fourth quarter of 2023 from 10.5% the previous year, despite aggressive price cuts. Globally, Tesla’s first-quarter deliveries fell to 387,000 units from 423,000 a year ago.
Still, getting preliminary approval for FSD and a data deal with Baidu are two huge wins for Tesla.
“Musk’s receipt of FSD approval in the key Chinese market is, in our view, a watershed moment in Tesla’s history,” Wedbush analyst Dan Ives said in a note to investors, saying further that it was a “home run” for Musk. “While Tesla’s long-term valuation story hinges on FSD and autonomy, a key missing piece in 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 its shareholder class renew and trading decline significantly over the past two weeks only.
An important part of developing Tesla’s AI-powered autonomous software is collecting large amounts of data to power its software model. Tesla has had to store its data in China since 2021 as per a regulatory requirement, Ives noted.
Tesla getting new approval to migrate that data in China to its U.S.-based servers will accelerate “the training of its algorithms for its autonomous technology on a global scale,” Ives said. Additionally, FSD users based in China may be more inclined to join the service and use it more frequently, as the government has encouraged autonomous driving in various localities, thereby providing more data for Tesla to improve its FSD software.
Pras Subramanian is a journalist for Yahoo Finance. You can follow it Twitter and on Instagram.
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