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AsianFin -- Tesla has rolled out the advanced intelligent driving technology to Chinese consumers with updated software, marking a major milestone for Tesla’s autonomous driving technology as it enters one of the world’s most complex and competitive automotive markets.

The full self-driving (FSD) system, introduced on Tuesday in China, offers key features such as automatic lane changes, traffic signal recognition, and steering control. With the features, Tesla's FSD can now perform automatic assisted driving on urban roads, positioning itself alongside the intelligent driving capabilities offered by leading domestic car manufacturers.

Tesla shares rose by 2% following the announcement. Despite this, Tesla shares have recorded a 16% drop since the start of 2025.

While Tesla celebrates the rollout of FSD in China, there are varying opinions on how it will affect Chinese intelligent driving landscape.

During a recent expert/media exchange at the China Electric Vehicle 100 Forum in Beijing, Ouyang Minggao, an academician of the Chinese Academy of Sciences and Vice Chairman of China EV100, a nonprofit organization and third-party think tank, weighed in on the situation.

He mentioned that AI advancements like DeepSeek have reduced the computational power required for autonomous driving. Ouyang also noted that Chinese companies still have a dominant position in the market. Given the current geopolitical climate, Tesla will still have to navigate multiple regulatory challenges as it enters China’s market.

Tesla’s entry into China with its FSD technology has not been a smooth journey. Rumors of Tesla’s plan to launch FSD in China began circulating after CEO Elon Musk’s visit to the country in April 2024. Later, during Tesla’s earnings call in July, Musk confirmed plans to seek regulatory approval in both China and Europe, with hopes of launching FSD in both regions by the end of 2024.

Despite the market anticipation, concerns over software-related accidents in the U.S. and data security issues slowed the progress. Last August, media reports said that Chinese regulators had not approved the technology due to these concerns. However, these reports were not confirmed by Tesla.

In September 2024, Tesla’s “Tesla AI” official social media account announced plans to launch FSD in China and Europe by early 2025, pending regulatory approval.

During Tesla’s Q4 2024 earnings call, Musk outlined the challenges of launching FSD in China, particularly the difficulties surrounding government restrictions on data transfer and GPU usage.

To overcome these obstacles, Tesla plans to use publicly available Chinese road videos to train its system and feed them into simulators. Musk also highlighted that China’s unique road features, such as bus lanes, posed particular challenges for FSD in the country.

China’s road environment is vastly different from that of North America, which presents unique challenges for the deployment of FSD. With nearly 80,000 urban bus routes, over 1.7 million kilometers of road, and dense traffic in major cities, the system needs to be finely tuned to recognize local traffic signs, street markings, and even cultural nuances in road signs. For example, road markings like “fishbone lines” and “guiding strips,” along with the country’s varying traffic conditions, require Tesla’s FSD to be both highly predictive and adaptive to different urban environments.

Musk specifically mentioned China’s bus lanes as a significant obstacle. With traffic regulations varying by city, Tesla’s FSD must accurately interpret time restrictions and signage to avoid potential fines for entering a bus lane at the wrong time. Additionally, the presence of electric vehicles, pedestrians jaywalking, and the diverse driving behaviors across China’s regions all demand continuous adjustments and updates to the system.

Tesla’s FSD entry into China comes at a time when the company is under pressure in the U.S. market. Industry analysts predicted that Tesla’s global sales would decline for the first time in 2024, and the Chinese market—despite accounting for 37% of Tesla’s global sales—began to show signs of slower growth. If FSD succeeds in China, it could become a key differentiator for Tesla, particularly in the high-net-worth user segment, which has been increasingly drawn to advanced autonomous driving technology.

In 2024, Tesla’s global deliveries totalled just 1.789 million vehicles, falling short of its 2024 target and marking a 1.1% decline compared to 2023. In China, Tesla’s  sales exceeded 657,000 units, an 8.8% year-on-year increase year over year. However, Tesla’s market share in China fell , from 16.6% in 2021 to 7.4% by November 2024.

The rise of Chinese competitors such as BYD, which has aggressively pushed for “intelligent driving for all,” and Huawei, which has focused on developing advanced intelligent driving technology, has intensified competition for Tesla in China.

The Chinese intelligent driving market has become polarized, with companies like BYD and Huawei pursuing different strategies to gain market share. BYD’s focus is on popularizing intelligent driving technology, bringing advanced features to more affordable vehicle models, while Huawei aims for the technological high ground with its ADS 2.0 system, which supports multi-level parking navigation and other advanced features. Both companies are rapidly developing features that meet the specific needs of Chinese consumers.

Tesla’s FSD, in contrast, has yet to adapt fully to some of the high-frequency scenarios that local brands have optimized for, such as cut-ins and narrow road navigation. Furthermore, the cost of FSD in China, at 64,000 yuan, is significantly higher than similar features offered by local competitors, like Huawei’s ADS 3.0, which offers a more affordable subscription plan for advanced intelligent driving.

In response to Tesla’s FSD launch, Chinese manufacturers have expressed confidence in their ability to compete. He Xiaopeng, Chairman of Xpeng Motors, revealed plans to launch a more advanced L3-level autonomous driving technology by mid-2025, which they expect to surpass Tesla’s FSD.

Meanwhile, Yu Chengdong, Chairman of Huawei’s Board of Directors of the Intelligent Automotive Solution BU, argued that his company’s advanced perception system, which uses LiDAR, offers better performance in China than Tesla’s pure vision-based FSD system.

Experts have noted that the future of Tesla’s FSD in China will depend on several factors. First, the speed at which Tesla can localize its technology will be critical. Tesla’s FSD is built on a “pure vision” technology approach, relying solely on cameras and neural network algorithms, which has worked well in North America but faces challenges in the more complex Chinese road environment. Second, the possibility of regulatory approval will play a crucial role. Tesla must navigate China’s strict data localization laws and meet stringent regulatory standards for autonomous driving technologies.

Tesla’s future success in China will depend on how well it can compete with local players like BYD and Huawei, which have already tailored their intelligent driving systems to the specific needs of Chinese drivers. Tesla must reinforce its brand and continue adapting to local conditions to maintain its competitive edge.

In the short term, Tesla’s FSD may struggle to replicate its North American experience. However, if Tesla can overcome the technical and regulatory hurdles, its algorithm architecture could eventually make a significant impact on China’s intelligent driving market.

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