Elon Musk fails to resolve Tesla’s crisis in China

Even with the desperate visit to Asia, Tesla’s deal with Baidu is not new, the mapping data Tesla will collect will likely not be able to leave China, and Full Self-Driving will not be able to compete with more advanced Chinese alternatives.

ELON MUSK WILL be pleased that his surprise visit to China on Sunday received plenty of glowing headlines. The trip was undoubtedly equally a surprise for Indian Prime Minister Narendra Modi, who was scheduled to offer Musk the red carpet in a long-planned visit.

The billionaire dismissed India at the last minute, citing Tesla’s “very heavy obligations”. In fact, Tesla has had a tumultuous few weeks, with crackdowns from federal regulators, profits cut in half, and price cuts implemented. However, in a public snub that Modi won’t quickly forget, the company’s CEO made time for Chinese Premier Li Qiang.

And well, Musk can. Tesla needs China more than China needs Tesla. After the US, China is Tesla’s second largest market. And, ominously, in the first quarter of the year, Tesla sales in China fell 4% in a domestic electric vehicle market that expanded by more than 15%. That’s enough for any CEO to hop in a Gulfstream and fly across the Pacific for an impromptu meeting with a Chinese prime minister.

Globally, Tesla has lost nearly a third of its value since January, and earlier this month, Tesla’s worldwide first-quarter vehicle deliveries fell for the first time in nearly four years. As they often do, Tesla investors continue to complain about the company’s repeated delays in launching cars with genuine autonomous driving capabilities.

One of Tesla’s interim technologies — an add-on now heavily discounted at $8,000 — is marketed as Full Self-Driving, or FSD. But like the similarly confusingly named Autopilot feature, it still requires the driver’s attention and can still be risky.

Among the deals that were revealed at Sunday’s meeting with Li Qiang was a partnership that grants Tesla access to a mapping license for data collection on China’s public roads by web search company Baidu.

This was a “watershed moment,” said Dan Ives, senior analyst at Wedbush Securities, in an interview with Bloomberg Television. However, Tesla has been using Baidu for in-car mapping and navigation in China since 2020. The revised deal, in which Baidu will now also provide Tesla with its lane-level navigation system, eliminates yet another regulatory hurdle for Tesla’s FSD. Tesla in China. It does not allow Tesla to introduce driverless cars in China or anywhere else, as some media have reported.

Press reports also stated that Musk obtained permission to transfer data collected by Tesla cars in China to outside of China. That’s unlikely, noted Junheng Li, CEO and head of research at JL Warren Capital, who wrote in X: “[Baidu] owns all the data and shares filtered data with Tesla. Imagine if [Tesla] had access to real-time road data, such as who went to which country’s embassy, ​​at what time and for how long.” This, she emphasized, would be “super national security!”

According to Reuters, Musk is still seeking final approval to launch the FSD software in China, and Tesla still needs permission to transfer data abroad.

Li added that the implementation of even a “supervised,” data-driven version of the FSD in China is “extremely unlikely.” She pointed out the challenges for Tesla to support the local operation of the software. Tesla still “does not have access [direto] to the cartographic data of China as a foreign entity,” she wrote.

Instead, Tesla is likely using the Baidu deal extension as a workaround for FSD, with data collected in China largely remaining in China. Despite this, Tesla shares soared following news of the expanded collaboration with Baidu.

Furthermore, Li said there is “no strategic value” for Beijing to favor the FSD when several more advanced Chinese alternatives exist. (We tested them.)

“Chinese EVs are simply evolving at a much faster rate than Tesla,” agrees Mark Andrews, a Shanghai-based automotive journalist and WIRED contributor who has tested the driver assistance technology available on China’s roads. The US-listed trio of Xpeng, Nio and Li Auto offer better “driving assistance features” than Tesla, which relies heavily on lidar sensors, a technology that Musk previously rejected but which Tesla is now testing.

Although outdated and lacking the latest technology, a Tesla car is nevertheless more expensive in China than most of its rivals. Tesla recently cut prices in China to stem falling sales.

Musk’s whirlwind visit to China reeked of “desperation,” says Mark Rainford, owner of the Inside China Auto channel. “The sales [da Tesla] have fallen in China – competition has resisted price cuts so far and [os concorrentes da Tesla têm] a seemingly endless conveyor belt of talented and beautiful products.” Rainford also warns that the “golden period for Tesla in China” is at “great risk of collapse”.

Tesla opened its first gigafactory in Shanghai five years ago, and it’s now the company’s largest – but the automaker has been trying to catch up technologically in China for some time. In addition to Xpeng, Nio and Li, there are other Chinese automakers competing with Tesla in autonomous driving, as Musk will see if he visits the Beijing Motor Show, which takes place this week.

Beijing is now arguably the world’s most prominent auto show, but Tesla isn’t exhibiting — a sign that it has little new to offer tech-savvy Chinese car buyers. Obviously, the Cybertruck isn’t road legal in China, although that hasn’t stopped Tesla from showing off the rust-prone electric pickup truck in some of its Chinese showrooms.

Similarly, Tesla just announced plans for a European tour of the Cybertruck. But, just like in China, the EV pickup truck cannot be sold in the EU either – and according to Tesla’s leadership in vehicle engineering, it probably never will be.

Speaking about stricter pedestrian safety regulations in the EU compared to the US, Tesla vice president of vehicle engineering Lars Moravy told Top Gear that “European regulations require a 3.2mm outer radius at external projections. Unfortunately, it is impossible to make a 3.2mm radius on a 1.4mm stainless steel sheet.”

The “Cybertruck Odyssey” tour – as Tesla’s European X account calls it – may excite Tesla fans, but it could be just as useful as launching a Roadster into space.

Text via Wired by Carlton Reid, an award-winning freelancer who writes about cycling, transport and adventure travel for a range of titles including Forbes, The Guardian and Mail Online. He is the author of Roads Were Not Built For Cars, Bike Boom (Island Press).