Tesla Faces Stiff Competition in China’s Self-Driving Race

Tesla's ambition to dominate China's self-driving market faces significant challenges as local rivals like BYD and Huawei rapidly advance in autonomous technology. During his recent visit to Beijing, Elon Musk discussed potential regulatory approvals essential for Tesla’s Full Self-Driving rollout amidst escalating competition from established and emerging Chinese electric vehicle (EV) manufacturers.

Tesla Discusses FSD Launch in China Amid Intense Local Competition and Regulatory Hurdles

According to XM, Musk arrived in Beijing on April 28 for a quick trip to discuss the prospective rollout of its FSD driver-assistance system and the possibility of obtaining regulatory clearances for foreign data transfers from Tesla TSLA.O vehicles in China, according to a source familiar with the trip.

Such data, used to train self-driving systems, would help Tesla's long-term attempts to build completely autonomous vehicles.

Industry analysts and executives believe Tesla, as it did with electric cars, could be a formidable rival in China's autonomous vehicle category, given its early lead in creating driver-assistance systems with certain autonomous functions.

Tesla, however, faces formidable competition from BYD 002594: SZ, China's largest EV manufacturer, and Huawei HWT.UL, a smartphone manufacturer emerging as a national tech champion, has introduced systems geared to handle China's tightly packed urban settings.

Over the last two years, at least ten automakers and suppliers have debuted driver-assistance systems capable of navigating metropolitan streets and making intersection turns. Others include EV manufacturer Xpeng 9868.HK and Li Auto 2015.HK, as well as Xiaomi 1810.HK, a smartphone manufacturer, recently launched its first automobile, an instant success.

According to Maxwell Zhou, co-founder of DeepRoute.ai, a China-based firm that sells software for advanced driver assistance systems, any new model priced above $30,000 in China now requires advanced driver assistance features to compete.

"You must have a high-level driving solution to prove you have a smart car, not a stupid car," Zhou told Reuters.

Xpeng has announced intentions to launch a new mass-market brand, Mona, featuring self-driving technologies on a vehicle priced under $21,000. That is over $10,000 less than the Model 3's China price.

Many industry experts believe it will take years before autonomous vehicles become ubiquitous, but projections vary greatly.

Driver-assistance features already available in China are "level two" systems, requiring a driver prepared to take charge. Tesla's FSD and its less-advanced Autopilot are level-two systems requiring vigilant drivers.

More fully automated vehicle fleets operated by Baidu 9888.HK, China's biggest search engine operator, and Pony.ai, an autonomous driving startup, run in limited test zones.

Tesla's FSD Launch in China Spurs Innovation Race Among Local EV Manufacturers

According to Yale Zhang (via Reuters), executive director of Shanghai-based consultancy Automotive Foresight, Tesla's attempt to launch FSD in China will "pressure the other EV startups to accelerate their R&D."

When China's government approved Tesla's Shanghai facility in 2018, the country witnessed a similar trend in electric vehicle development. At the time, officials hoped for a "catfish effect" - that dumping a giant catfish, Tesla, in the tank would cause the other fish, China EV companies, to swim more quickly.

China's industries responded. BYD, the country's EV leader, has already produced many models at various price ranges, starting below $10,000, as China's EV sales soared from just over 105,000 in 2018 to more than 1.5 million last year.

Zhang said Tesla's autonomous vehicle development in China could have the same impact: "It would be the 'catfish effect' for the second half of the game."

At last week's Beijing car show, Chinese manufacturers and suppliers hailed "level-two-plus" driver-assistance systems with more advanced sensors and displays. While authorities have not authorized them for hands-free driving, some are intended to be with future software upgrades.

While Tesla primarily employs cameras to detect threats around self-driving cars, other automakers are developing systems that integrate lidar, which detects objects by light pulses.

Huawei demonstrated components from telematics receivers that work with the US-backed GPS and China's rival BeiDou satellite system, as well as lidar and optical sensors for sophisticated driver assistance systems.

"It's good for the market," he said. "We love doing innovative and disruptive stuff."

Tesla could be one of the most formidable challengers, thanks partly to its capacity to collect data from its vehicles - the world's largest fleet of EVs on the road today. However, under Beijing's data security regulations, it is not permitted to move data from its cars in China overseas without prior consent.

According to sources familiar with Musk's contacts with Chinese officials, Musk has pressed for the data to train its self-driving technology outside of China. It is still being determined what progress, if any, Musk achieved on data transfers with Chinese authorities he met in Beijing, including Premier Li Qiang.

Musk did depart China with indications that Tesla TSLA.O is getting closer to supplying FSD in China, which would provide a new source of revenue when EV sales and pricing are under severe pressure from Chinese competitors.

The trip resulted in Tesla's endorsement from China's car industry group, stating that its best-selling models meet China's data privacy standards. It also agreed with Baidu to allow Tesla to collect data using its mapping license.

In a LinkedIn comment, Xpeng Motors CEO He Xiaopeng stated that Tesla's decision to launch FSD in China could exacerbate what he expected would be a decade-long war for domination of "smart EVs."

China will not be the exclusive battlefield. He said it is vital for China's self-driving technology industry to start "making its mark on international markets outside its own turf."

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