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Tesla is bracing for a potential delay in obtaining Chinese approval for its autonomous driving technology, as Elon Musk’s electric-vehicle company risks getting dragged into the escalating US-China trade war.
The company has been told there is no definitive timetable for regulators to approve a licence for it to begin widespread training of its “full self-driving” (FSD) technology, despite an earlier indication that it would get the green light in the second quarter of 2025, people with knowledge of the matter told the Financial Times.
The licence would be an important step towards Tesla being able to offer semi-autonomous functionality in its vehicles in China, a development that would boost subscription revenues and help shore up its shrinking sales in the world’s largest automotive market.
The system can accelerate, steer, brake and change lanes but still requires drivers to be alert with their hands on the wheel.
Tesla had announced in September that it planned to roll out FSD technology in China and Europe in the first quarter of 2025, subject to regulatory approval.
That ambition had already slipped and is now in greater doubt as US President Donald Trump engages in a trade war with China. Beijing imposed retaliatory tariffs on a range of American goods this month after the US put an additional 10 per cent levy on all Chinese products.
Chinese authorities are contemplating using the approval of Tesla’s autonomous-driving licence as a bargaining chip in trade negotiations with Trump, said two of the people with knowledge of the delay, adding that this was the main reason for the hold-up in granting the permit.
The approval could still come soon, depending on how trade negotiations developed, one of the people added. But another said that some people at the company believed a speedy consent was unlikely unless there was “a major breakthrough or concession” in trade talks.
The Ministry of Industry and Information Technology, which regulates smart vehicles in China, Tesla US, Tesla China and Musk did not respond to requests for comment.
The situation illustrates how Musk’s close relationship with Trump, to whom he is a key adviser and donor, could backfire on the world’s richest man and parts of his business empire, including in Tesla’s most important market outside the US.
Musk has personally led the EV maker’s lobbying efforts in Beijing, flying in for a surprise meeting with Chinese Premier Li Qiang last April.
In June, Shanghai allowed FSD testing by 10 Tesla vehicles as a precursor to a wider rollout across China, while Tesla also struck a deal last year to use systems from tech group Baidu, which offers navigation and mapping.
However, Musk said last month that Tesla was “in a bit of a bind” as it tried to deploy FSD in China, stuck between Beijing and Washington’s strict data security rules.
FSD 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,” said Musk on Tesla’s latest earnings call. “It’s a bit of a quandary.”
These challenges would remain even if the FSD licence were granted by Chinese authorities.
Musk’s 2018 gamble to build Tesla’s biggest gigafactory in Shanghai was widely seen as a catalyst for the rapid expansion of China’s EV industry.
But local players have since surpassed Tesla with lower prices and a faster rollout of models with more luxurious features. Tesla is counting on FSD, which costs customers $99 a month in the US, to differentiate its cars and revive earnings.
Tesla had a 4.5 per cent share of new EV sales in China in January, according to data from the China Passenger Car Association, while Warren Buffett-backed BYD held 27 per cent and may strengthen its lead with the “God’s Eye” advanced driver-assistance system it unveiled this month.
Unlike Google’s Waymo, Tesla’s FSD is still not approved in the US for “fully autonomous” operation. Musk has promised that Tesla will have unsupervised, self-driving cars on Texas roads by June.
However, he has a record of missing his own deadlines and Tesla faces US regulatory investigations into accidents involving FSD and the company’s public claims about its capabilities.
Musk admitted in July 2024 that his “predictions about achieving full self-driving have been optimistic in the past” before going on to predict that Tesla’s FSD would be “better than human by the end of this year”.
Additional reporting by Gloria Li in Hong Kong, Wenjie Ding and Ryan McMorrow in Beijing, Kana Inagaki in Tokyo and Joe Miller in Washington