Musk's sudden visit to China on Sunday has attracted great attention from the outside world.

After arriving in Beijing on the same day, Musk immediately met with Chinese Premier Li Qiang. During the meeting, Premier Li Qiang stated that Tesla's development in China can be regarded as a successful example of Sino US economic and trade cooperation. And it is stated that China's super large market will always be open to foreign-funded enterprises.

Musk said that Tesla's Shanghai Super Factory is the best performing factory for Tesla, thanks to the hard work and wisdom of the Chinese team. Tesla is willing to further deepen cooperation with China and achieve more win-win results.

Later, Musk also posted pictures of a meeting with Premier Li Qiang on social media platform X, accompanied by an article saying, "It's an honor to meet Premier Li Qiang. We've known each other since we were in Shanghai, and it's been many years now." When Tesla built a super factory in Shanghai, Premier Li Qiang worked there.

Overnight trading at online brokerage Robinhood showed Tesla shares sharply higher during Musk's visit to China on Sunday.

Tesla meets China's automotive data processing requirements

Musk's last visit to China was in May 2023, when he met with officials from the Chinese Ministry of Foreign Affairs, Ministry of Industry and Information Technology, Ministry of Commerce, China Council for the Promotion of International Trade, and Shanghai Municipal Government, and inspected the Shanghai factory late at night.

It is widely rumored that Musk came to China mainly for the entry of fully autonomous driving technology (FSD). Although there is currently no official confirmation, there have been positive news related to it.

On Sunday evening, the official official account of the China Association of Automobile Manufacturers issued a notice on the detection of four safety requirements for automobile data processing (the first batch).

The notification mentioned that the China Association of Automobile Manufacturers and the National Computer Network Emergency Technology Coordination Center, in accordance with relevant regulations and standards, will organize testing on the data security compliance of newly launched intelligent connected vehicles by automobile manufacturers for the years 2022-2023, in accordance with the principle of voluntary inspection by enterprises. Starting from November 2023, the testing will include four compliance requirements: anonymization processing of facial information outside the vehicle, default not collecting cabin data, cabin data in the vehicle processing, and significant notification of personal information processing. Among them, 76 models of six enterprises, including BYD, Ideal, Lotus, Hezhong New Energy, Tesla, NIO, etc., meet the four compliance requirements for automotive data security.

Among the 76 models mentioned above, the 2022 and 2023 models of Tesla's Model 3/Y meet the requirements, which means that all models produced by Tesla's Shanghai Super Factory meet the requirements. It is worth noting that Tesla is the only foreign-funded enterprise on the first list that meets compliance requirements.

Industry insiders believe that Tesla has passed the authoritative standards and requirements of China's national vehicle data security, which is conducive to the comprehensive lifting of restrictions on Tesla's movement and parking in some sensitive areas. Previously, due to factors such as data collection, Tesla vehicles were prohibited from entering sensitive locations such as government agencies.

Recently, Tesla has lowered the prices of its FSD services, which seems to be preparing for large-scale promotion. Earlier this month, Tesla lowered the FSD subscription price in the United States to $99 per month and the purchase price from $12000 to $8000.Currently, Tesla mainly promotes its FSD services in North America. But Musk stated during Tesla's earnings conference call last week that FSD "actually runs well in almost any market without modification," so the company plans to release the system anywhere it can obtain regulatory approval, including in China.

Promoting FSD is not easy

Although Musk intends to promote FSD in China, in reality, the company faces many obstacles.

On the one hand, the competition for autonomous driving function is not small in the domestic electric vehicle market in China.Currently, multiple local companies have launched assisted autonomous driving and are implementing fully autonomous driving technology similar to Tesla FSD. Several car brands, including Xiaopeng Motors, Xiaomi Motors, and Huawei Wenjie, have already made this type of feature a selling point for their cars.

Compared to local manufacturers, Tesla's FSD advantage is no longer as obvious as a few years ago. Some netizens commented that Tesla FSD would be a "Rocket" product if it entered China a few years ago, but it is hard to say now.

On the other hand, the collection of relevant data is also an obstacle for foreign companies like Tesla.

According to media reports, Musk's purpose for this trip is to obtain approval from relevant authorities to transfer the data he collected in China to foreign countries for training algorithms in autonomous driving technology. Since 2021, Tesla has stored all data collected on Chinese cars in Shanghai in accordance with the requirements of Chinese regulatory authorities and cannot transmit any data back to the United States.

Industry experts say that China's complex traffic conditions, with more pedestrians and cyclists than many other markets, provide more scenarios that are crucial for accelerating the training of autonomous driving algorithms. This may be an important reason why Musk sought to transfer data.

However, although Tesla's dream is beautiful, in reality, this path is not easy to follow.

CITIC Securities pointed out that first of all, map data is highly sensitive and closely related to national security. It is still unknown how Tesla can obtain relevant qualifications, or establish joint ventures with Chinese companies or pilot projects in Shanghai. However, it is not easy to achieve large-scale deployment in a short period of time.

Secondly, the pure visual approach relies more on a large amount of data acquisition and model training for image processing. Therefore, Tesla has built its own supercomputing center in the United States, Dojo, and developed its own D1 chip to significantly improve the efficiency of FSD training. CITIC Securities believes that in China, even if Tesla obtains data collection qualifications, it is highly likely that model training can only be conducted locally in China. This means that in order to achieve the same training efficiency as the United States, Tesla needs to establish a supercomputing center similar to Dojo in China, which requires a certain development cycle and cost.

It is not easy to solve the above problems, so it is hard to say whether FSD can really be promoted in China.

Wedbush Securities analyst Dan Ives said, "If Musk can obtain approval from Beijing to transfer the data collected in China to foreign countries, it will change the rules of the game."

Ives stated that Tesla's long-term valuation story depends on FSD, and a key part of it is Tesla's provision of FSD in China, "and now it seems to be within reach."

He also believes that this visit is of great significance to Tesla and Musk, as it will further strengthen their electric vehicle footprint in the Chinese market at a critical moment.

It is worth noting that before Musk's visit to China, he suddenly cancelled his planned visit to India from April 21st to 22nd last week, citing "Tesla's business is very heavy.". Musk had originally planned to meet with Indian Prime Minister Modi during his trip to India and may announce a significant investment in India, including the construction of a Tesla factory.