Tesla's China Self-Driving License in Limbo Amidst US-China Trade Tensions

Tesla is facing a potential delay in securing Chinese approval for its autonomous driving technology, a setback attributed to the escalating US-China trade war, the Financial Times reports.

The company had anticipated receiving the license, a crucial step toward offering semi-autonomous features in China, by the second quarter of 2025. However, this timeline is now uncertain, sources familiar with the matter told the Financial Times.

This license is crucial for Tesla to offer semi-autonomous functionality in its vehicles in China, a development that would boost subscription revenues and help shore up its declining sales in the world's largest automotive market.

Tesla's existing system, while capable of accelerating, steering, braking, and changing lanes, still requires driver engagement and hands-on operation.

The delay stems from Beijing's potential use of the approval as leverage in trade negotiations with the US, according to two sources. "Chinese authorities are contemplating using the approval of Tesla's autonomous-driving licence as a bargaining chip in trade negotiations with Trump," one source said.

The approval could still be granted soon, depending on the trajectory of trade talks. However, another source indicated that some within Tesla believe a swift approval is unlikely without a significant breakthrough or concession in trade negotiations.

The Ministry of Industry and Information Technology, which oversees smart vehicles in China, Tesla US, Tesla China, and Elon Musk have not yet responded to requests for comment.

The situation highlights the potential drawbacks of Elon Musk's close relationship with US President Donald Trump, particularly for Tesla's operations in China, its most significant market outside the US. Musk's personal lobbying efforts in Beijing, including a surprise meeting with Chinese Premier Li Qiang last April, may be counterproductive.

While Shanghai authorized FSD testing by ten Tesla vehicles in June as a precursor to a wider rollout, and Tesla secured a deal last year to utilize systems from Baidu, Musk acknowledged last month that Tesla faces challenges in deploying FSD in China. He cited conflicting data security regulations between Beijing and Washington as the primary obstacle.

"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 stated on Tesla's recent earnings call.

These challenges would persist even if the FSD license were granted by Chinese authorities.

Tesla's 2018 decision to build its largest gigafactory in Shanghai was initially seen as a catalyst for China's burgeoning EV industry. However, local competitors have since surpassed Tesla, offering lower prices and more feature-rich models. Tesla is banking on FSD, which costs $99 per month in the US, to differentiate its vehicles and revitalize its earnings.