Tesla’s launch of self-driving system in China to widen autonomous tech adoption in world’s largest EV market, analyst says

Tesla’s potential launch of its Full Self-Driving system in China is expected to help widen local availability of such autonomous vehicle technology
FSD, however, is unlikely to shake up the industry because Tesla’s domestic rivals have started to offer similar technologies

Self-driving cars and autonomous vehicles

Iris Dengin Shenzhen

Published: 10:30pm, 9 May 2024

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Tesla’s potential launch of its Full Self-Driving (FSD) system in China is likely to widen the adoption of autonomous driving in the world’s largest electric vehicle (EV) market, but it would have little impact on boosting domestic car sales amid cutthroat competition, according to a Bank of America (BofA) analyst.

Autonomous driving is currently not a priority for Chinese EV buyers, so Tesla’s FSD is unlikely to shake up the industry because local rivals have started to offer similar technologies, according to Ming Lee, head of Greater China Autos Research at BofA Global Research, on the sidelines of the Innovative China Conference in Shenzhen on Thursday.

“The good thing is that they can help make the adoption of autonomous driving more widely available to consumers,” Lee said.

Speculation on how Tesla’s FSD launch could impact China’s EV market reflects the anticipation for the US carmaker’s proposed domestic launch of a “robotaxi” service, which would test its advanced driver assistance system on the mainland.

A Tesla Model 3 vehicle warns the driver to keep hands on the wheel when the carmaker’s Autopilot feature and Full Self-Driving system are engaged in a test run at Encinitas, California, on October 18, 2023. Photo: Reuters

Tesla plans to launch its robotaxi service and test the FSD system in Shanghai, Reuters said in a report, citing people briefed on the matter.

Chief executive Elon Musk had sought consent to operate a robotaxi business on the mainland during a discussion with the country’s top policymakers last month, according to a report published by state-run China Daily. Beijing will grant Tesla such a licence to show the government’s positive stance on economic ties with the United States, the newspaper added.

Tesla is looking to push its FSD system in China’s EV market, which accounts for about 60 per cent of global sales, amid a growing price war in the country. The company in April slashed prices on its Shanghai-built EVs by more than 5 per cent.

While Tesla remains the second-biggest EV vendor in China, it has to contend with aggressive discounts by rivals in a crowded market. BYD, the world’s bestselling EV builder, has cut prices by 5 per cent to 20 per cent on nearly all of its models since late February.

Tesla’s electric vehicles, parked outside a store in Beijing. Photo: Bloomberg

There are close to 100 auto brands competing in China, including 70 traditional carmakers, and many are sacrificing profits for survival by offering steep price cuts, according to BofA’s Lee. Industry consolidation in the next two to three years will see less than 30 players left in the market, Lee said.

BofA estimates China’s EV penetration rate to reach 50 per cent of new car sales in 2025, compared to 42 per cent projected for this year. That would be an improvement from last year’s 35 per cent penetration rate.

“This is very different from the US and Europe because we have seen EV penetration slowing down in these two big markets in the past few months already,” Lee said.

Moody’s Investors Service, however, estimated that new-energy vehicles (NEVs) would make up about half of mainland car sales by 2030, compared to a 31.6 per cent adoption rate in 2023. NEVs comprise pure electric cars, plug-in hybrid types and fuel-cell hydrogen-powered vehicles.

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