Tesla's self-driving ambitions in China challenged by rivals surging ahead

Tesla vs locals: Tesla's endeavour to introduce its "Full Self-Driving" technology in China faces stiff competition from local contenders advancing rapidly. If Tesla manages to deploy its FSD system in China, it will accelerate its position in the global race towards autonomous driving.

During a brief visit to Beijing starting from Sunday, Elon Musk discussed the potential launch of Tesla's FSD driver-assistance system and the likelihood of obtaining governmental approvals for international data transfers from Tesla vehicles in China, news agency Reuters reported, citing sources.

The data collected, essential for training self-driving systems, would boost Tesla's long-term pursuit of fully autonomous vehicles.

Similar to its success in electric vehicles, Tesla could emerge as a formidable player in China's autonomous vehicle sector, according to industry analysts and executives, citing its early lead in developing driver-assistance systems with partial autonomous capabilities.

Rivals ramping up

However, Tesla confronts formidable competitors such as BYD, China's largest electric vehicle manufacturer, and Huawei, a leading smartphone maker transitioning into a national tech powerhouse, both of which have introduced systems tailored for navigating China's densely populated urban environments.

These two giants are amongst a cohort of at least 10 automakers and suppliers that have unveiled driver-assistance systems in the past two years capable of maneuvering through city streets and negotiating intersections. Other participants include electric vehicle manufacturers Xpeng and Li Auto, as well as Xiaomi, the smartphone manufacturer that recently ventured into the automotive sector with its debut vehicle, receiving immediate acclaim.

According to Maxwell Zhou, co-founder of DeepRoute.ai, a startup in China offering advanced driver-assistance software, any new model priced above $30,000 in China now requires sophisticated driver-assistance features to demonstrate its intelligence.

Xpeng has announced intentions to launch a new mass-market brand, Mona, featuring self-driving capabilities on a vehicle priced below $21,000, significantly undercutting the China price of Tesla's Model 3 by over $10,000.

Autonomy's gradual evolution

While industry experts anticipate it will be several years before fully autonomous cars become commonplace, opinions on the timeline vary significantly.

The driver-assistance features currently available in China are categorised as "level two" systems, necessitating a ready driver to take control. Similarly, Tesla's FSD and its less advanced Autopilot options are also level-two systems, mandating attentive drivers.

Meanwhile, Baidu and Pony.ai operate partially automated vehicle fleets in restricted test zones.

Tesla's endeavour to introduce FSD in China is expected to catalyse other electric vehicle startups to hasten their research and development efforts, according to Yale Zhang, managing director at Automotive Foresight, a consultancy based in Shanghai.

Zhang likened this potential impact to the "catfish effect" observed in the electric vehicle sector when Tesla was authorised to establish a plant in Shanghai in 2018, prompting a surge in innovation amongst Chinese electric vehicle manufacturers.

At the recent Beijing auto show, Chinese automakers and suppliers showcased "level-two-plus" driver-assistance systems equipped with more advanced sensors and displays. While not yet approved for hands-off driving by regulators, some are designed to accommodate future software upgrades.

Unlike Tesla, which relies solely on cameras for hazard detection in self-driving cars, other automakers are integrating lidar, a technology that employs light pulses to detect objects, into their systems.

Huawei exhibited components such as telematics receivers compatible with both the US-based GPS system and China's BeiDou satellite system, along with lidar and optical sensors, for advanced driving systems. The Chinese tech giant aims to rival major suppliers like Bosch and Continental in this space.

Markus Heyn, board member of Bosch responsible for its mobility unit, welcomed the competition, stating, “It's good for the market. We love doing innovative and disruptive stuff.”

Data dilemma in China

Tesla could pose a formidable challenge, partly due to its capacity to gather data from its vehicles, currently the largest fleet of electric vehicles worldwide. However, under Beijing's data security regulations, Tesla cannot transfer data from its Chinese cars offshore without approval.

Elon Musk has advocated for the availability of this data for training its self-driving technology outside China. The progress, if any, made by Musk on data transfers during his visit to Beijing, including meetings with Premier Li Qiang, remains undisclosed.

Nevertheless, Musk departed China with indications that Tesla is nearing the launch of FSD in China, potentially unlocking new revenue streams amidst intense competition from Chinese rivals as its electric vehicle sales and pricing face pressure.

Tesla's achievements from the trip included an acknowledgement from China's auto industry association that Tesla's top-selling models comply with China's data privacy regulations and a collaboration agreement with Baidu permitting Tesla to utilise its mapping licence for data collection.

He Xiaopeng, CEO of Xpeng Motors, remarked on LinkedIn that Tesla's potential launch of FSD in China could escalate a decade-long battle for supremacy in "smart EVs," stressing the importance for China's self-driving technology industry to expand into international markets beyond its domestic sphere.