Musk leaves China with Tesla driving software hurdles cleared

Elon Musk’s quick visit to China 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 carmaker will partner with Chinese tech giant Baidu Inc. for mapping and navigation functions to deploy what it calls Full-Self Driving, or FSD, 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 bringing FSD to market.

Baidu shares rose as much as 7 per cent in Hong Kong trading.

The moves come after Tesla Chief Executive Office 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 charges $8,000 in the US to buy FSD outright, or $99 a month for a subscription.

Read More: Musk Makes Surprise China Visit in Search of Tesla Revenue Boost

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 Sunday 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 Monday, 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 per cent in the fourth quarter of 2023, from 10.5 per cent 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, the company sold fewer cars in the first quarter. Musk is cutting headcount by at least 10 per cent and looking to accelerate new models, including less-expensive vehicles, that could be ready by early 2025, if not before year-end.

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.”

Teaming with Baidu— one of about only 20 qualified suppliers with the country’s top-level mapping credentials that can be applied in driver-assistance functions— will allow Tesla to tap the Chinese company’s vehicle lane-level navigation and mapping services. 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.

During an earnings call last week, Musk emphasized the importance of autonomous-driving development, saying that people who doubt Tesla’s ability to “solve” autonomy shouldn’t invest in the company.