The application prospect of Tesla’s Full Self-Driving (FSD) in China is becoming increasingly clear, which not only provides a boost to its technological progress but also indicates potential demand growth in the market. According to the latest reports, the Beijing government has made a decision to introduce more FSD features in Tesla cars sold within China. When we reached out to Tesla for a comment, there was no response.
In addition, responding to a user’s question on social media about the release time of FSD in China, Tesla CEO Elon Musk said, “It may be implemented very soon”. Following this, the purchase page for the official Chinese FSD service displayed in Tesla’s user app has been updated to show “coming soon,” rather than the previous “coming later”.
Despite this, the driving assistance features currently provided by Tesla in the Chinese market do not yet include all the capabilities of the FSD system but only include features such as adaptive cruise control. Analysts believe that the launch of FSD in China is of great significance to Tesla.
Recently, Tesla’s stock price has also shown a positive trend of growth. On April 29th, Eastern Time, Tesla’s stock price surged in the stock market and ended the day up 15.31%, while the S&P 500 and Nasdaq indices rose 0.32% and 0.35%, respectively.
The potential rollout of FSD in China implies three positive aspects. First, it will enable Tesla to better comply with the Chinese government’s regulations on driving assistance technology. Reports also revealed that Tesla will utilize navigation and mapping services provided by Baidu. According to insiders, the cooperation between Tesla and Baidu Maps is exclusive and deeply customized. This move has also resulted in a significant increase in Baidu’s stock price.
Second, for Tesla itself, confidence in its autonomous driving technology is steadily increasing. Musk has high expectations for the potential of autonomous driving and believes it can bring substantial economic benefits to the company. Analysts have also based long-term valuations of Tesla on the development potential of FSD and autonomous driving. The goal of achieving autonomous driving should not be overlooked, it’s a challenge the industry has been striving to achieve over the past 20 years.
Finally, the successful implementation of autonomous driving would be a milestone for both Musk and the Chinese market. In the long run, the upgrade and improvement of FSD functions are expected to drive an increase in Tesla’s market demand in China. Now, facing the slowdown in automotive growth due to the impact of the pandemic, Tesla is facing certain challenges. In the first quarter of this year, Tesla’s vehicle deliveries fell by 8.5% year-on-year, only reaching 387,000 vehicles.
In the Chinese market, Tesla delivered 132,400 vehicles in the first quarter, a slight decline from the same period last year, recording a drop of 3.6%. Looking from the beginning of the year to date, Tesla’s stock price has fallen by about 22%, compared with the 6% rise of the Nasdaq index; Tesla’s performance is not outstanding. Nevertheless, following Musk’s announcement of plans to accelerate the production of a more economical Model 2, Tesla’s stock price had achieved a rebound of 14%.
As Tesla continues to introduce more Full Self-Driving (FSD) features, the company is expected to attract more consumers in the fiercely competitive Chinese market, providing strong support for the valuation of its stocks. Analysts point out that FSD technology is an important avenue for Tesla to explore new markets. According to Baird analyst Ben Kallo, Tesla’s recent add-on rate of FSD is expected to increase, currently at about 10%, which will help to boost the company’s long-term car supply capacity.
When analysts assess the future of Tesla, there are differing opinions. Some analysts have a positive attitude toward Tesla, such as Kallo and another analyst Ives, who both rated Tesla stock as a “buy,” and set target prices of $275 and $280 respectively. However, Jonathan Woo from Philips Securities downgraded Tesla’s rating from “hold” to “sell,” and lowered the target price from $175 to $145 due to the company’s slowing growth and pressure on profit margins.
On the other hand, Katie Stockton, founder of Fairlead Strategies, which focuses on technical analysis, suggested that based on stock chart analysis, Tesla’s stock price broke through the 50-day moving average on April 29, and the next resistance level could be close to $200. Such analysis focuses more on predicting short-term trends.
According to data from FactSet, among the analysts covering Tesla, about 43% have given a “buy” rating, up from 41% the previous day. In comparison, the average percentage of stocks in the S&P 500 index that receive a “buy” rating is about 55%.
