Tesla’s Stock Movement Ahead of Key Negotiations with China
In a notable shift following several days of gains, Tesla (TSLA) shares experienced a downturn on Tuesday as CEO Elon Musk prepared to visit China alongside President Trump later this week. The stock had surged last week amidst a rebound in technology shares and the announcement of Tesla’s upcoming chip fabrication facility, the Terafab, in Austin.
On Monday, the stock approached the $450 mark, reflecting a nearly 15% increase over the previous five trading sessions. However, early trading on Tuesday saw a drop in its value. This fluctuation comes as President Trump convenes with prominent US CEOs, including Musk, as well as leaders from Boeing and Apple, in discussions with China’s President Xi Jinping. Trade delegations from both nations are set to negotiate new trade agreements in the wake of the ongoing trade disputes initiated during Trump’s presidency.
One critical topic of negotiation for Tesla is the approval of its Full Self-Driving (FSD) software in China. Despite Musk’s optimistic forecasts targeting an early 2026 approval, deadlines have continuously been pushed back. During the company’s Q1 earnings call, the third quarter was earmarked for a potential approval timeline, yet uncertainties prevail. Chinese regulators have displayed hesitance concerning self-driving technology, particularly following incidents involving Baidu’s autonomous vehicles.
Recent events led to Chinese authorities reportedly halting new autonomous driving licenses, raising further concerns regarding regulatory approval for Tesla’s FSD. Critics have also raised issues with BYD’s (BYDDY) self-driving technology, with customers citing erratic performance, which underscores the scrutiny that Tesla may face in their bid for approval.
While Tesla’s FSD is deemed more sophisticated than competitors like BYD, obtaining regulatory endorsement remains a significant hurdle. Gaining approval for FSD could enhance Tesla’s positioning in the highly competitive Chinese automotive market, where it is currently experiencing pressure from other players, including Xiaomi and Geely.
In April, Tesla sold 25,956 vehicles in China, reflecting a nearly 10% decline compared to the previous year. The company’s market share in the new-energy vehicle sector has dwindled to 3%, and its share of the electric vehicle market has dipped to 4%. Analysts point out that the early month of each quarter often focuses on fulfilling export orders from Giga Shanghai, with later production dedicated to domestic sales. Nevertheless, securing FSD approval would provide Tesla with a substantial advantage in an increasingly crowded market.
In conclusion, as Tesla navigates this critical juncture in its relationship with Chinese regulators, the outcome of these negotiations could have lasting implications for its operations and market competitiveness in the region.
