Tesla removes major barrier to driving in China with Baidu deal

(Bloomberg) — Elon Musk's surprise visit to China appears to have paid off immediately, with Tesla Inc. has overcome two major hurdles to introduce its driver assistance system to the world's largest car market.

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The American electric car manufacturer will collaborate with Chinese technology giant Baidu Inc. for mapping and navigation features to deploy what the company calls Full-Self Driving, according to people familiar with the matter. Tesla has also approved a major data security and privacy requirement in China, which could alleviate some of the concerns about its data security issues.

The measures come after Tesla CEO Elon Musk made an unannounced trip to China on Sunday, seeking approval for driver assistance software that could help stem the automaker's sales slide. While the suite of features requires constant supervision and doesn't make Teslas autonomous, in the US the company charges $8,000 to buy FSD outright, or $99 per month for a subscription.

Read more: Musk makes surprise visit to China in search of boosting Tesla sales

Musk met Sunday with Premier Li Qiang, who as Chinese Communist Party secretary for Shanghai helped the company build what is now the world's largest factory.

Although Tesla was initially welcomed to the red carpet in China, its fortunes have faded recently as it faces stiffer competition from domestic EV makers like BYD Co. and Li Auto Inc. Tesla's share of the Chinese car market shrank to about 6.7% in the fourth period. from 10.5% in the first quarter of last year, according to Bloomberg calculations based on data from the Chinese Passenger Car Association.

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

The company is also experiencing its first year-on-year decline in quarterly sales since 2020, having sold fewer cars even after cutting prices. The company is reducing its workforce by at least 10% and wants to accelerate the number of new models, including cheaper vehicles, which could be ready in early 2025 if not before the end of the year, Musk said last week.

Musk's surprise visit to China 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 think could unlock what could really be the golden opportunity for them when it comes to FSD and autonomous in China, which is a missing piece in the puzzle.”

While the green light for FSD in China could help Tesla regain some lost ground, the system has proven problematic in the US. The top US auto safety regulator just opened an investigation into the company's less capable Autopilot system, citing 20 accidents that have occurred since December involving vehicles receiving an over-the-air software update.

In an earnings call last week, Musk emphasized 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.

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