This Is the Kink in Tesla FSD’s Armor in China

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Elon Musk seems to have pulled off a mini coup d’état of sorts against Tesla’s detractors by placating the Chinese politburo into allowing an eventual rollout of the FSD in the world’s biggest market for EVs. Yet, the gambit might not entail the kind of windfalls currently being priced in by Tesla bulls.

For the benefit of those who might not be aware, Elon Musk paid a surprise visit to China over the weekend to hold talks with Premier Li Qiang. Judging by the fact that Tesla won an in-principal approval for the rollout of its FSD service in the country, the high-profile meeting appears to have been quite productive.

Shortly thereafter, Tesla reached an agreement with Baidu to access the mapping data required for lane-level autonomous navigation in China. Concurrently, China-built Model 3 and Model Y (2022 and 2023 production units) have now passed a safety test that paves the way for the lifting of certain access restrictions for Tesla in China.

These back-to-back developments have supercharged Tesla bulls, who’ve now started to incorporate quite rosy FSD uptake projections in their overall thesis. Consider the fact that at the time of publication, Tesla shares are up around 11 percent in today’s pre-market trading.

Yet, as pointed out by JL Warren Capital’s Junheng Li, “almost all TSLA owners in China live in large cities” with an average daily one-way commute of just around 30 minutes. This severely restricts the uptake potential for Tesla’s FSD, as Xpeng has found out to its detriment.

Meanwhile, even seasoned Tesla bulls do not see massive adoption of the FSD until the autonomous driving system gets to “99.99 percent efficacy,” which, judging from the ever-increasing number of Autopilot lawsuits, is still a fair distance away.

Do note that Tesla has staged a massive recovery over the past few days, with the stock now up 35 percent relative to its pre-earnings price after incorporating today’s pre-market pump. While the initial recovery could be attributed to a relief rally of sorts after Elon Musk assured investors of Tesla’s commitment to rolling out the cheaper Model 2, the current phase of this price pump is now being spearheaded by FSD-related euphoria.

Editor’s note: Title updated to reflect accurate article link.

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