Tesla's stock (TSLA) experienced a significant surge in pre-market trading on Wall Street, gaining more than 6% following reports that China is set to approve the automaker's deployment of its Full Self-Driving (FSD) package in the country. The approval comes with certain conditions, according to a person with knowledge of the matter who asked to remain anonymous due to the ambiguity surrounding all the criteria.
Tesla CEO Elon Musk's surprise visit to China, his second in less than a year, played a crucial role in securing this approval. During his two-day trip, Musk met with Chinese Premier Li Qiang, who praised Tesla as a "successful model" for US-China collaboration. The Tesla chief's primary goals were to seek Beijing's approval for the FSD rollout and the transfer of its data overseas, as reported by Reuters.
To comply with China's data security rules, Tesla has reached a deal with Chinese tech giant Baidu to form a partnership on mapping and navigation functions ahead of the FSD system deployment, according to a Bloomberg report. The China Association of Auto Manufacturers also announced that Tesla's Model 3 and Y vehicles had passed the country's data security requirements, a significant milestone considering the company's previous challenges with data management in the country.
Dan Ives, managing director and senior equity research analyst for Wedbush Securities, described the potential FSD availability in China as a "watershed moment" for Musk and Beijing, particularly amid Tesla's facing massive domestic EV competition and softer demand in the world's biggest EV market. Ives also highlighted the potential "game changer" of Musk obtaining approval to transfer data collected in China abroad, which could accelerate the training of Tesla's algorithms for its autonomous technology globally.
Premier Li's praise for Tesla during his meeting with Musk underscored the deep integration between the Chinese and US economies. "You have me, and I have you. Both sides can benefit from each other's development," Li said, according to an official readout of the meeting. Musk reciprocated the sentiment, expressing Tesla's willingness to further deepen cooperation with China and achieve more win-win results.
Musk's visit coincided with the Beijing Auto Show, where global and Chinese EV makers are vying for consumer attention in the highly competitive market. Tesla has recently made aggressive price cuts in China and other major markets to counter declining sales and growing competition.
The Tesla CEO's trip to China also included meetings with Ren Hongbin, chairman of the China Council for the Promotion of International Trade, to discuss Tesla's future development in the country and the prospect of strengthening exchanges between American and Chinese business communities.
Musk's long-standing relationship with Premier Li, dating back to 2018 when Tesla signed a deal with the Shanghai government to open a plant there, has been instrumental in the company's success in China. Li, then Shanghai's party boss, provided major support to Tesla, allowing it to become the sole owner of its Shanghai factory while other foreign automakers were required to partner with local firms.
