Tesla Inc. is facing a potential delay in acquiring approval for its full self-driving (FSD) technology in China as trade tensions between China and the US escalate.
The tables of President’s Trump’s America-first agenda have turned. The president has championed the initiative of putting American companies first and has limited trade to China, causing losses for a number of companies like Samsung.
Now, China is fighting back. According to the Financial Times, Chinese authorities are contemplating using Tesla’s FSD license as a strategic asset in negotiations with President Trump. Considering his friendship with Tesla CEO, Elon Musk, they just might get their way.
China blocks Tesla
The initial expectation was for Tesla to acquire the regulatory approval required to launch its FSD system in China by the second quarter of 2025.
The FSD system enhances the driving experience by assisting the drivers with accelerating, steering, braking, and changing lanes. The technology does however require drivers to be alert and actively involved in driving.
Obtaining the license would be an important step towards Tesla being able to offer semi-autonomous features in its vehicles in China. The implementation of the technology would drive up its sales that have been in a downward trend as a result.
Tesla announced in September 2024 that it planned to roll out FSD technology in China and Europe in the first quarter of 2025. However, after Trump began imposing export restrictions on China, the probability of achieving that feat dropped.
The FT report claims that China intends to leverage the approval of Tesla’s technology in trade negotiations with Trump, meaning the outcomes for the EV maker could depend on how the talks develop.
Tesla could be collateral damage in US-China relations
Like Joe Biden before him, President Donald Trump has been trying to limit China’s access to developed AI technology, leading the US to impose trade limits and high tariffs against the world’s most populous country.
In retaliation, Beijing imposed tariffs on a range of American goods this February after the US put an additional 10% levy on all Chinese products.
It’s no news that neither country is on friendly terms at the moment. Musk previously said that Tesla was “in a bit of a bind” as it tried to launch FSD in China, amidst the sparring nations’ strict data security rules. And even if Tesla were to obtain a license for the FSD technology, this will not change.
The FSD technology is based on a machine learning system that is fed billions of hours of video to train an algorithm to make driving decisions in real time.
“They won’t currently allow us to transfer training video outside of China. And then the US government won’t let us do training in China,” Musk said on Tesla’s latest earnings call. “It’s a bit of a quandary.”
Elon Musk’s friendship with Trump seems to be doing him and his company a great disservice in this situation and the longer the delay, the more Tesla risks losing its already dwindling spot in the Chinese market.
Local competitors with cheaper prices and more luxurious models, like BYD, are already taking over the market. Tesla had a 4.5% share of new EV sales in China in January, according to data from the China Passenger Car Association, while BYD held 27% and may strengthen its lead with the “God’s Eye” feature it recently unveiled.
Cryptopolitan Academy: Coming Soon - A New Way to Earn Passive Income with DeFi in 2025. Learn More
