Tesla (TSLA) stock rose on Monday following reports that CEO Elon Musk has secured Chinese approval to deploy the automaker’s full self-driving (FSD) autonomous software on the mainland.
As first reported by The Wall Street Journal, people familiar with the matter said officials told Tesla they had temporarily approved FSD in the country during Musk’s 24-hour visit to Beijing over the weekend.
Separately, Bloomberg previously reported that Tesla will use street-level mapping data from Chinese tech company Baidu to power the FSD. Tesla was previously using Baidu’s mapping data for satellite navigation in its cars. The report said that working with the Chinese company helped with regulatory approval as data privacy and security risks are reduced.
Tesla closed up 15.3%, reaching its highest level since March 1. Tesla stock is now up more than 30% over the last four trading sessions.
While pricing for the FSD in China was not disclosed, in the US, Tesla charges $8,000 upfront (down from $12,000) for lifetime use and $99 per month for subscription services.
Adding FSD functionality in China is a big deal for the automaker not only for additional revenue, but also in terms of competitive edge it would give Tesla a leg up against rivals like NIO, Li Auto, Xpeng, and even tech giants like Xiaomi. What it gives up against, is entering the auto market with its own semi-autonomous software.
“What Tesla has to do is stay at the forefront of innovation. They have to be the most technologically advanced solutions,” Leland Miller, China expert at China Beige Book, told Yahoo Finance. “We have a domestic market that is saturated, and a price war going on…(Tesla) needs to stay on top of the tech ladder.”
The lack of FSD in Tesla cars is likely to impact sales in China, where the latest technology features are prioritized. Despite aggressive price cuts, Tesla’s market share in China is set to decline to 6.7% in the fourth quarter of 2023 from 10.5% last year, according to the China Passenger Car Association. Globally, Tesla’s Q1 deliveries fell to 387K units from 423K a year ago.
Still, getting initial approval for the FSD and the data deal with Baidu are two big wins for Tesla.
“Musk getting FSD approval in the key China market is a historic moment for the Tesla story in our view,” Wedbush analyst Dan Ives said in a note to investors. He further claimed that it was a “home run” for Musk. “While the long-term valuation story at Tesla rests on FSD and autonomy, a key missing piece in that puzzle is Tesla making FSD available in China now that a deal has been done.”
Tesla’s focus on autonomous driving and even the future of its robotaxi is considered a long-term catalyst for the company, which has seen changes in its shareholder class and business declines significantly over the past few weeks.
A key part of developing Tesla’s AI-powered autonomous software is the collection of large amounts of data to feed into its software models. Ives said Tesla has had to store its data in China since 2021 as per a regulatory requirement.
Getting further approval for Tesla to transfer that data to its U.S.-based servers in China would accelerate “training its algorithms for its autonomous technology globally,” Ives said. Additionally, China-based FSD users may be more inclined to choose this service and use it more frequently as the government promotes self-driving in various localities, thus giving Tesla more data to improve its FSD software. Has been provided.
Prasad Subramaniam is a reporter for Yahoo Finance. you can follow him Twitter and on Instagram,
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