Tesla's Self-Driving Ambitions In China At Risk As US-China Trade War Heats Up: 'It's A Bit Of A Quandary,' Says Elon Musk

Tesla Inc. TSLA is reportedly experiencing a delay in obtaining approval for its autonomous driving technology in China, a setback attributed to the ongoing trade war between the US and China.

What Happened: Chinese authorities might leverage the approval of Tesla’s self-driving license as a negotiation chip in trade talks with the U.S., a strategic maneuver believed to be the primary reason for the delay, reported the Financial Times on Monday.

Despite earlier indications of Tesla receiving a license for extensive training of its Full Self-Driving Beta in the second quarter of 2025, the company has now been informed of an indefinite timeline. Tesla’s attempts to launch its FSD system in the Chinese market have been ongoing, with last year’s reports hinting at an impending deal.

In Tesla’s recent earnings call, CEO Elon Musk voiced his concerns about the FSD prospects in China, pointing to data transfer restrictions between the two nations. "They won't currently allow us to transfer training video outside of China. And then the U.S. government won't let us do training in China. It's a bit of a quandary," stated Musk. As a result, Tesla is instead training its system using publicly available videos of Chinese streets and simulation tools.

Despite these hurdles, Musk remains optimistic, stating that Tesla aims to achieve unsupervised self-driving in China by the end of the next year.

SEE MORE: Xi Jinping’s Supportive Appearance Sparks Chinese Tech Rally For Second Day: Alibaba, Xiaomi Surge Over 4% On Hong Kong Exchange

Why It Matters: Tesla’s challenges in China are not new. In 2022, the Chinese government began barring Tesla cars from certain areas over national security concerns. The ban was extended to the Beidaihe district for two months during the Communist Party’s annual summer retreat. It also faced a ban near military complexes during President Xi Jinping's visit to Chengdu.

Meanwhile, the landscape for autonomous cars in China has been heating up, with Tesla rivals BYD Co. Ltd. BYDDY and Huawei making advancements. BYD rolled out its “God's Eye” advanced driver assistance system across all its models, including the budget-friendly Seagull hatchback, starting at around $9,600.

Moreover, Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management highlighted that all these competitors "use LIDAR" technology, compared to Tesla's camera-only system.

Despite these hurdles, Tesla has continued its operations in China. The company announced on Monday that it had started production of its refreshed Model Y at its Shanghai gigafactory, with deliveries expected to start soon. The ongoing trade tensions and the delay in FSD approval highlight the complexities Tesla faces in the Chinese market.

Tesla stock dropped more than 16% in a month to close at $355.84 on Friday.

• READ MORE: Elon Musk Has A Frosty Relationship With Dad Errol But Last Year Gifted Him A Luxury Car That Was Surprisingly Not A Tesla — Here’s Why

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.