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The global slowdown in Tesla demand has worsened in the country, where electric vehicles from domestic rivals such as BYD and Xiaomi are being offered on parade at a time when consumers are watching their spending.
China is Tesla’s biggest market outside the United States, meaning the drop in interest has clear knock-on effects.
The company delivered about 387,000 vehicles in the first three months of this year, down 20% from the previous quarter. Tesla’s financial results last month also heightened concerns after the company reported quarterly sales fell nearly 9% from a year earlier to $21.3 billion.
So Mr. Musk’s response in recent weeks, which appears to have tightened his focus on the Far East, is at least based on some logic.
During a visit to Beijing last month to meet Chinese Premier Li Qiang, news broke that the billionaire had struck a huge deal to partner Tesla and Chinese internet giant Baidu on robot taxis.
Elon Musk meets with Chinese Premier Li Qiang in Beijing.
Wang Ye/Xinhua News Agency/AP News
The deal reportedly gives Tesla access to mapping and navigation software that supports fully self-driving (FSD) cars, a clear positive. Tesla shares rose 15% on news of the partnership to support Musk’s new focus on autonomous driving.
Mr. Musk now appears to be stepping up his efforts.
according to Reuters reporting Tesla on Friday said it is exploring building a data center in China that could be used to “train the algorithms needed for more fully self-driving cars.”
The reasons why Mr. Musk is doing this are becoming clear.as The billionaire recently wrote about“Hitting a ball against a wall in search of autonomy is a blindingly obvious move. Everything else is a variation of the horse-drawn carriage.”
But in moving in this direction, Musk risks walking a fine line.
As an example, self-driving technology has proven difficult to produce on a global scale. One of Tesla’s main challenges is the intense price war it is waging with Chinese competitors, which are trying to win over buyers with cheaper vehicles.
But by prioritizing the lofty goal of having millions of self-driving Teslas on the roads around the world, Musk is pursuing a risky bet that will only pay off in the distant future.
Using China as a testbed for self-driving technology could also cause anxiety in Washington. Tesla’s ability to demonstrate his globally competent FSD capabilities will depend on the availability of high-quality data transferred between the US and China. This is a complex proposition in times of heightened tensions.
Tesla has not disclosed any details about the reported partnership, much less the security concerns that could arise if the Chinese government monitored the data supplied to its vehicles under the FSD banner. Not to mention how to address the concerns.
Instead, many investors are looking for the coveted sub-$30,000 Tesla models that Musk has previously talked about as a way to open Tesla up to the mass market.
In fact, Wedbush analysts said last month that Tesla More affordable model He calls the switch to robotaxis within the next 18 months a “risky bet.”
But with China seemingly top of mind for Musk, Tesla is heading into an uncertain future.