Al Root

The political intrigue at Tesla took a new turn on Monday.

It's one more thing for investors to worry about.

The Financial Times reported that approval of Tesla's Full Self-Driving $(FSD)$ driver assistance product could be delayed in China, with officials in the country using the electric vehicle maker as a bargaining chip with President Donald Trump in a brewing trade war.

Tesla didn't respond to a Barron's request for comment.

Trump has threatened 10% import tariffs on Chinese goods, and Tesla CEO Elon Musk is running the Department of Government Efficiency for the president after backing his campaign with millions of dollars in donations.

Tesla's FSD is its highest-level driver assistance product and the one that Musk believes will turn the company's vehicles into truly self-driving cars. Tesla plans to launch a self-driving robotaxi service using existing models running FSD later in 2025.

Tesla stock soared 15.3% on Apr. 29, 2024, after Musk visited China and won approval to sell FSD in the country.

Investors were excited by the news because it could mean more market share and more revenue for Tesla in one of its largest markets. Better driver assistance products could mean more car sales and Tesla charges a lot for FSD.

Tesla currently offers "Fully Autonomous Driving Capabilities" in China for 64,000 yuan ($8,800). The value of FSD might not be that high. Chinese EV rival BYD announced recently that its driver assistance products would be essentially free -- just part of the car purchase without any upsell.

Getting money for FSD requires Tesla to deliver on its promise of improvement over time. Improvement takes training the system with AI computers, which has been difficult for Tesla and might be what China will use as leverage with Trump.

"We do have some challenges because [China] won't allow us to transfer training video outside of China," said Musk in January on his company's fourth-quarter earnings conference call. "And then the U.S. government won't let us do training in China. So, we're in a bit of a bind there."

China might want to extract trade concessions to resolve the bind.

Tesla stock was up 1.4% in premarket trading at $360.66, while S&P 500 and Dow Jones Industrial Average futures were 0.3% and 0.1%, respectively.

Tesla stock has had a wild ride lately. Shares are up about 42% since the Nov. 5 election but down about 26% from their all-time closing high of $479.86 reached on Dec. 17.

Musk's political activities have been part of the post-December decline as investors evaluate what Musk's position in the Trump administration means for Tesla stock. Now there is another factor to weigh in that equation.

Write to Al Root at allen.root@dowjones.com

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February 18, 2025 04:39 ET (09:39 GMT)

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