Even though China has outperformed the U.S. in terms of commercializing EVs and developing affordable models, the global EV movement has largely been spearheaded by Tesla. When Elon Musk’s company launched in China in 2019, it set early standards for software, range, charging capabilities and manufacturing, sparking an intense rivalry that’s playing out even today. As Tesla plans to deploy its Full-Self Driving (FSD) suite of driver assistance features in China, it is also spearheading another wave of competition among automakers in the country.
This kicks off today’s edition of Critical Materials, your regular round-up of news and events shaping the world of electric cars, software-defined vehicles and autonomous technology. Also included in today’s edition: Tesla faces heat from California regulators over accusations of misleading customers about the capabilities of FSD and how Chinese automakers have doubled down on their commitment to manufacturing EVs in Europe despite an ongoing probe over excessive subsidies.
30%: Tesla’s FSD Sparks The Next Wave Of Innovation In China
Until recently, autonomous or semi-autonomous cars were mostly restricted in China. Data security concerns mean Tesla’s FSD was even more limited in the country. To clear the path for FSD, Musk went to China last month and brought home a win for Tesla, reaching a mapping and navigation deal with Chinese tech giant Baidu and complying with the local data security and privacy requirements.
Now Tesla is poised to spearhead this next wave of technological innovation in the country. And as it’s preparing to bring FSD to Chinese consumers, its rivals in China aren’t just quietly spectating.
There’s an increasing number of Chinese automakers bringing high-tech eyes and ears to their cars. As many as nine brands, including BYD and Nio, have been approved to participate in a pilot program to test semi-autonomous cars in real-world conditions in a limited number of areas, the Industry and Information Technology Ministry said last week.
Here’s more from Bloomberg on how competition is heating up in this space:
Cutting-edge tech may be just what China’s new-energy vehicle market needs to revitalize buyer interest. While sales in May were up 36% from a year ago, growth has been slowing and a price war has eaten away at automakers’ margins.
Urban-focused advanced driver assistance systems packages in China start from low as $1,100, as is the case in Great Wall’s HP570, amounting to about 3% of the vehicle’s sticker price, BloombergNEF said in an April report. Huawei’s most advanced driver-assistance system is priced at 36,000 yuan.
The price differential may reflect the fact that Chinese automakers’ Navigation-on-Autopilot features, or NOA, are still being tested, along with consumers’ propensity to pay up.
China’s NOA features also are limited by domestic computing capabilities, which require high-performance semiconductors that companies don’t always have access to.
FSD costs 64,000 yuan ($8,800) in China but customers can’t activate the system yet, and hence Tesla has seen limited buyers so far. Equivalent Chinese systems are not only far cheaper but also come with more hardware like laser-based radars and sensors.
Tesla relies only on cameras and footage to train FSD. In some cases, beta testers have found big improvements in how FSD handles real-world situations in the U.S. But Chinese traffic patterns are far more complex and include a mishmash of congested city roads, bicycles, mopeds and pedestrians.
We may get more clarity on how Tesla navigates this increasing competition and China’s complex traffic after this week’s shareholder vote regarding Musk’s pay package. Regardless of how that goes, one thing is clear: with or without Tesla, the battle to develop the next big thing in the autonomous vehicle space is starting to heat up.
60%: FSD Returns To Limelight For False Advertising Claims
But while Tesla prepares to deploy FSD in China, troubles regarding its automated driving tech are growing here at home. In 2022, the California DMV accused the company of misleading customers regarding the capabilities of Autopilot and FSD.
It has said that Tesla’s systems "could not at the time of those advertisements, and cannot now, operate as autonomous vehicles." Now a California administrative judge has rejected Tesla’s bid to dismiss the accusations.
Here’s what Reuters said this morning:
In a decision on Monday, Judge Juliet Cox of the state Office of Administrative Hearings (OAH) said the accusations by California's Department of Motor Vehicles would if true support an enforcement action against Tesla.
It sought remedies that could include suspending Tesla's license to sell vehicles in California and requiring Tesla to make restitution to vehicle owners.
In her five-page decision, Cox said it was premature to dismiss the DMV case before a formal hearing. Tesla had said a hearing was unnecessary because Cox already had enough documents from which to rule.
Even though Tesla has made it clear that Autopilot and FSD require constant driver supervision and readiness to take control at all times, the branding “Full-Self Driving” itself is contradictory to its capabilities. Why brand something as FSD before it’s ready and then retreat to say that driver supervision is a must?
As Tesla pivots to artificial intelligence and robotaxis, these growing legal obstacles could slow down its quest for solving autonomy, something Musk has pledged to accomplish.
In the wake of growing scrutiny over false advertising, Tesla recently rebranded FSD to FSD (Supervised.)
I’m not a big fan of the updated label. Maybe it should be called something entirely different. Any suggestions on what that could be?
90%: Chinese EV Makers Won’t Back Down In Europe
Europe is on the cusp of a trade war with China regarding the soon-to-be-announced tariffs on cheap Chinese EV imports.
The bloc has accused China of excessively and unlawfully subsidizing its EVs, leading to unfair competition. Towards the end of last year, the EU began an official probe into the matter. China has admonished the EU’s claims. China Association of Automobile Manufacturers (CAAM) called the probe an "obvious act of protectionism."
Now the China Passenger Car Association, a leading auto industry group, has said that the European Commission's impending tariffs on Chinese EV imports won’t discourage the country’s automakers from investing in the continent.
Read more from Reuters about this trade conflict:
"Chinese enterprises will continue to unswervingly develop in Europe and integrate into local markets," said Cui Dongshu, secretary general of the China Passenger Car Association (CPCA).
"The traditional carmaking industry plays a big part in generating employment in Europe ... Chinese firms won't take aggressive measures or low-pricing moves to disrupt the stability of employment in Europe," Cui said.
Stiff competition and the threat of EU tariffs, which China labels as protectionism, have done little so far to deter Chinese EV makers from ramping up production and exploring overseas markets.
Tariffs may not reflect the broader sentiment in Europe regarding Chinese EVs. BMW, Mercedes-Benz, and Volkswagen have warned against tariffs, as a potential retaliation can hurt their businesses in China. One estimate suggests that German carmakers bring in 20-23% of their global profits from their operations in China.
"Isolation and illegal customs barriers—that ultimately just makes everything more expensive, and everyone poorer. We do not close our markets to foreign companies, because we do not want that for our companies either,” German Chancellor Olaf Scholz recently said at a Stellantis event.
Hungary, Spain, Italy and Poland are finding ways to lure Chinese EV makers to set up factories. BYD will set up its first European factory in Hungary and is reportedly scouting locations for a second plant. Other automakers like Chery Automobile and SAIC Motor are also eager to invest in Europe, wherever they find the most favorable subsidies.
100%: Can Chinese Automakers Outpace The West In The Autonomy Race?
Ultimately, it could boil down to who develops computing capabilities faster and who gets their hands first on the most advanced AI chips. Leave your thoughts in the comments.
Contact the author: suvrat.kothari@insideevs.com
