Tesla is on the verge of finalizing plans to power the global development of its self-driving system using data from China that could be processed within the United States, according to sources familiar with the matter. This marks a significant strategic shift by CEO Elon Musk, as the company aims to leverage Chinese data to advance its autonomous vehicle technology.
In an effort to enhance its self-driving capabilities, Tesla has been developing plans to establish a data center in China to train the algorithms required for fully autonomous vehicles. This initiative, confirmed by two anonymous sources, reflects the company’s push to secure approval from Chinese regulators to transfer data generated by its electric vehicles (EVs) in China out of the country for its “Full Self-Driving” (FSD) system.
While it remains uncertain whether Tesla will proceed with both options—transferring data internationally and setting up a local data center—the company appears to be hedging its bets by exploring parallel plans.
Tesla’s efforts underscore the urgency of its pivot towards artificial intelligence breakthroughs amid slowing EV demand and intensifying competition. The push to utilize data from Chinese vehicles comes as the U.S. government tightens restrictions on transferring AI technology from American firms to China.
Currently, Tesla is unable to offer the full version of FSD, which costs nearly $9,000, in China. Expanding the market for FSD in China could significantly boost Tesla’s revenue and profits, especially as it faces mounting pressure from Chinese rivals such as BYD.
To establish a data center in China for FSD development, Tesla would need to collaborate with a Chinese partner, according to two sources. This partnership may also present hardware-sourcing challenges.
Tesla’s campaign to harness more data from China accelerated during Musk’s recent whirlwind trip to Beijing, where he met with top officials, including Premier Li Qiang. During this meeting, Musk sought to expedite permissions for Tesla’s data transfer and discussed the possibility of investing in a data center in China.
Additionally, Musk explored the potential of licensing Tesla’s FSD systems to Chinese EV manufacturers. In April, Musk mentioned ongoing talks with another “major” automaker about FSD licensing, though he did not disclose the name.
“It would definitely be a milestone for Tesla if it rolls out FSD in China and leverages the China data for algorithm training,” said Yale Zhang, managing director at Shanghai-based consultancy Automotive Foresight. “China played a key role in scaling up EV production for Tesla with the Shanghai factory. It would again serve a significant part in scaling up mass adoption of autonomous driving technologies,” he added.