As Tesla fights to maintain its position in China, the electric vehicle giant is facing a major roadblock: the potential denial of its Full Self-Driving (FSD) technology license. The delay, reportedly a bargaining chip in U.S.-China trade negotiations, underscores the challenges posed by Elon Musk’s close ties to both governments.
China, Tesla’s second-largest market, has yet to grant regulatory approval for the automaker’s advanced driver assistance system. According to a report from The Financial Times, Beijing may be withholding the permit as leverage in ongoing trade talks with U.S. President Donald Trump. The uncertainty has sparked concerns among investors, particularly as Tesla faces growing competition from domestic automakers.
Regulatory Hurdles and Political Influence
Tesla has long sought approval for its FSD software in China, where only its basic Autopilot system is currently available. The advanced FSD feature—sold for approximately $8,000—remains restricted due to regulatory concerns over data security and foreign technology use.
Musk, who serves as the head of the Department of Government Efficiency (DOGE) under the Trump administration, has cultivated strong relationships in both Washington and Beijing. However, some analysts warn that his proximity to Trump may now be a liability.
“Beijing grants favors and withholds favors,” said Isaac Stone Fish, CEO of Strategy Risks, a business intelligence firm. “They have many levers over Elon Musk and Tesla.”
Tesla Faces Increasing Competition in China
The licensing delay comes at a critical time for Tesla. In 2024, the company held just 6.1% of China’s new energy vehicle market, trailing far behind domestic competitor BYD, which dominated with a 32.5% share, according to the China Passenger Car Association.
BYD recently intensified competition by introducing an advanced driver assistance system—similar to Tesla’s FSD—free of charge on many of its models, some of which cost as little as $9,500. In response, Tesla released an update to its Autopilot system this week, adding a city navigation feature for select drivers.
Lei Xing, co-host of the China EVs & More podcast, described Tesla’s updated Autopilot as a “pretty good” solution given China’s data security restrictions. However, he noted that the technology remains “nowhere near” the latest U.S. version.
Musk’s Unique Position in U.S.-China Relations
Despite Tesla’s challenges, Musk continues to wield significant influence in China. His surprise visit to Beijing last April, where he met with Premier Li Qiang, underscored his ability to engage directly with top officials.
Wang Yiwei, director of the Institute of International Relations at Renmin University in Beijing, described Musk as a rare figure who can bridge the gap between the U.S. and China. “Given Musk’s direct ties with Xi and China, he could serve as a valuable link in this regard,” Wang told CNN.
However, Musk’s relationship with Trump may complicate matters. The U.S. president has imposed new tariffs on Chinese imports and threatened further trade restrictions. While Musk could advocate for Tesla’s interests in China, experts say his ability to sway Trump’s broader economic policies remains uncertain.
What’s Next for Tesla?
Tesla’s future in China hinges on whether Beijing approves FSD and how the company navigates an increasingly competitive market. While Musk’s connections have historically helped Tesla expand in China, they may now serve as both an asset and a liability.
For now, Tesla remains in a “quandary,” as Musk described in a January earnings call. “China won’t let Tesla transfer training videos outside of the country, and the U.S. government won’t let us do training in China,” he said.
With no clear resolution in sight, Tesla’s ability to maintain its foothold in China will depend on how it balances political tensions, regulatory challenges, and a rapidly evolving electric vehicle landscape.
