Tesla FSD May Face Delays in China Due to Trade Tensions, Bad News for the Stock

China represents a lucrative market, but gaining access may come at a much higher price than expected.  

According to Financial Times, Chinese authorities are reportedly considering Tesla's Full Self-Driving (FSD) approval as a bargaining chip in trade negotiations with the U.S. Sources familiar with the matter revealed that Tesla has been informed there is no definitive timeline for regulatory approval to begin widespread FSD training in China. This comes despite earlier indications that the company could receive the green light in Q2 2025.  

Unless there is a major breakthrough or concession in U.S.-China trade negotiations, Chinese regulators are unlikely to grant rapid approval. Given Elon Musk's close ties with Donald Trump, some Chinese officials may be attempting to leverage this relationship, pressuring Musk to influence Trump into easing his stance on China.  

Tesla Urgently Needs FSD in China  

The approval of FSD is crucial for Tesla's success in China. The local EV market is highly competitive, with domestic brands, led by BYD, rapidly gaining market share and challenging Tesla's customer base. Additionally, China's slowing economy has made Tesla's premium pricing less affordable for many consumers.  

Tesla's latest Q4 earnings report indicated that vehicle sales were underwhelming, with much of the company's optimism resting on Musk's ambitious FSD promises. Meanwhile, BYD recently launched an affordable Level 2 autonomous driving system, God's Eye, which competes directly with Tesla's FSD. Notably, this system is even available in 

sub-$10,000 vehicles, putting further pressure on Tesla's ability to compete.  

A lengthy delay in FSD approval could leave Tesla at a disadvantage if Chinese automakers make Level 2 self-driving a standard feature across their models.  

Even With Approval, Challenges Remain  

Even if Tesla ultimately secures FSD approval in China, it will not be a smooth ride. During the latest earnings call, Musk noted that China prohibits Tesla from transferring training video data outside the country, while the U.S. similarly restricts FSD training within China. This regulatory conflict puts Musk in a difficult position, limiting Tesla's ability to advance its AI model using Chinese data.  

China's Broader Crackdown on U.S. Tech Giants  

Tesla is not the only U.S. tech company facing regulatory scrutiny in China. Sources familiar with Beijing's strategy suggest that the government aims to accumulate as many bargaining chips as possible for future trade negotiations with Trump's administration.  

China has already launched antitrust investigations into Nvidia and Google and may expand scrutiny to Apple as part of its broader strategy against U.S. tech dominance.