Tesla’s stock prices have surged following news that the company has overcome a significant regulatory challenge in China by forming a partnership with the search engine giant Baidu.
Reports have emerged that Tesla’s shares increased after CEO Elon Musk made an unexpected visit to meet with China’s second-in-command, Premier Li Qiang.
This development follows Tesla’s new partnership with Baidu, which marks a significant advancement in introducing Tesla’s self-driving technology to the Chinese market.
Daniel Ives, an analyst at Wedbush, described the development as “a watershed moment.” While Tesla has been reached out to for comments and Baidu has declined to comment, Ives noted that Tesla faces intense competition from domestic electric vehicle manufacturers in China and is experiencing softer demand. However, he believes that the long-term value of Tesla hinges on gaining approval for fully autonomous driving.
The reported agreement with Baidu would enable Tesla to implement some of its autonomous driving technologies in China. Baidu’s expertise in mapping and navigation services would support Tesla’s self-driving features, such as assisted parking.
However, obtaining permission for fully autonomous driving would require further regulatory approvals.
Tesla is among the largest electric vehicle producers globally, with China being its second-largest market.
Despite its success, Tesla has not yet launched autonomous driving in China as it has in other countries like the U.S.
Nonetheless, Musk is a strong proponent of autonomous driving as the future of transportation.
“If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor,” he has previously said.
However, autonomous vehicles, including those in the US, still face significant challenges and additional regulatory scrutiny.
Tesla’s autopilot feature allows drivers to transfer control to the vehicle’s AI, though it requires continuous human supervision.
Despite these safety measures, there have been instances where the technology’s misuse has led to fatalities.
Last Friday, the US auto regulator initiated an investigation into the effectiveness of a software update by Tesla aimed at addressing issues with its autopilot feature.
The agency noted that “foreseeable driver misuse of the system” was a contributing factor in at least 13 Tesla-related accidents, which included at least one fatality and several severe injuries.
In December, a former Tesla employee expressed to the BBC his concerns that the technology underpinning the company’s autonomous vehicles was not safe enough for public road use.
‘Win-win results’
Tesla’s share price saw a significant rise of almost 12% as the US markets opened on Monday, regaining some of the losses it sustained since the beginning of the year.
Despite this boost, the stock is still down by more than a quarter since January.
The surge in stock value follows unconfirmed reports of Chinese regulatory approval, as covered by major news outlets like AP, Reuters, Bloomberg, and the Financial Times, after Mr. Musk’s recent trip to China to meet with top officials.
During his visit, state media reported Musk expressing a desire for more “win-win results” through cooperation with China.
Analysts suggest that Tesla’s need for approval in China is partly due to its weakened financial performance. Last Tuesday, the company reported sales of $21.3 billion for the first quarter of the year, a decline from $23.3 billion in the same period in 2023 and below the anticipated $22 billion.
This drop was attributed to increased competition and shifts in government and economic incentives for electric vehicles. While US revenue fell from $11.2 billion to $9.76 billion, sales in China also decreased, though less steeply, from $4.89 billion to $4.59 billion.