Elon Musk’s China trip pays off with key self-driving hurdles cleared

Elon Musk’s lightning visit to China appears to have paid immediate dividends, with Tesla Inc clearing two key hurdles to introduce its driver-assistance system to the world’s biggest auto market.

The US electric car maker will partner with Chinese tech giant Baidu Inc for mapping and navigation functions to deploy what it calls Full-Self Driving, according to people familiar with the matter. Tesla has also passed a key data security and privacy requirement in China, which would help ease some of the concerns over its data security issues.

Baidu shares rose as much as 7% in Hong Kong trading.

The moves come after Tesla chief executive officer Elon Musk made an unannounced trip to China on Sunday, seeking approval for driver-assistance software that could help arrest the carmaker’s revenue decline. While the suite of features require constant supervision and don’t make Teslas autonomous, the company in the US charges US$8,000 to buy FSD outright, or US$99 a month for a subscription.

The Wall Street Journal reported Monday that Chinese officials told Tesla that Beijing has tentatively approved the company’s plan to launch its FSD feature in the country, citing people familiar with the matter.

Musk met April 28 with Premier Li Qiang, who as the Chinese Communist Party secretary for Shanghai helped the company set up what is now its top plant globally. His private jet left Beijing on April 29, according to FlightRadar24.

While Tesla initially enjoyed a red-carpet welcome in China, its fortunes have faded more recently as it faces tougher competition from domestic EV makers like BYD Co and Li Auto Inc. Tesla’s share of China’s auto market shrank to around 6.7% in the fourth quarter of 2023, from 10.5% in the first quarter of last year, according to Bloomberg calculations based on China’s Passenger Car Association data.

Advanced driver-assistance systems are becoming increasingly common in China, with many local players including Xpeng Inc and Xiaomi Corp using such features as a selling point for vehicles.

Approval for FSD in China would be a major boost for Tesla, which is coming off its first year-over-year decline in quarterly revenue since 2020. Even after slashing prices it sold fewer cars in the first quarter of 2024. The company is cutting headcount by at least 10% and looking to accelerate new models, including less-expensive vehicles, that could be ready by early 2025, if not before year-end, Musk said last week.

Musk’s surprise China visit is “a watershed moment”, Wedbush Securities senior analyst Dan Ives said in an interview with Bloomberg Television. “This could open up FSD in China, which I view as unlocking what really could be the golden opportunity for them when it comes to FSD and autonomous in China, which has been a missing piece in the puzzle.”

Teaming with Baidu – one of about only 20 qualified suppliers with the country’s top-level mapping credentials that could be applied in self-driving functions – will allow Tesla to deploy the Chinese company’s vehicle lane-level navigation and mapping services for autonomous driving. Tesla has been using Baidu for in-car mapping and navigation apps since 2020.

While getting the green light for FSD in China might help Tesla claw back some lost ground, the system has proved problematic in the US. The top US auto-safety regulator has just opened a probe into the company’s less-capable Autopilot system, citing 20 crashes that have occurred since December involving vehicles that received an over-the-air software update.

In an earnings call last week, Musk emphasised the importance of autonomous driving to Tesla’s future, saying people who doubt the company’s ability to “solve” autonomy shouldn’t invest in it. – Bloomberg