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Tesla shares surge on news of cooperation with China

12 Jun
posted: 12/06/2024

Tesla shares surge on news of cooperation with China

Category: Blog views: 133

Elon Musk's Tesla share price soared after he secured a partnership with Chinese search and mapping group Baidu, paving the way for the introduction of semi-autonomous driving technology in China, the world's largest auto market.

The software is a source of revenue for Tesla in the U.S., with many users paying a monthly fee for it, and expanding it into China could boost the company's revenue and earnings, which have fallen sharply in recent quarters.

Elon Musk stayed in China for less than a day, but concluded a very important agreement for Tesla with the Internet giant Baidu, which is called the Chinese Google. Elon Musk arrived in China on April 28 and met with Premier of the State Council of the People's Republic of China Li Qiang, who, when he was secretary of the Shanghai City Committee of the Communist Party, helped the company build a plant in Shanghai. At the same time, it became known that Beijing has previously approved Tesla’s plan to launch software for fully autonomous cars in China. This was reported by The Wall Street Journal, citing sources.

Shares of electric car manufacturer Tesla rose by 7.98%, to $181.72, in the premarket on April 29, according to data from the NASDAQ exchange.

Baidu shares jumped 7% to HK$108 on the Hong Kong stock exchange on April 29 as well.

Tesla has also adopted key data security and privacy requirements in China, which will help ease concerns about bringing FSD to market, Bloomberg writes.

The approval of FSD in China will be a major boost for Tesla, which showed an annual decline in quarterly revenue for the first time since 2020, Bloomberg notes. At the end of the first quarter of 2024, the company’s revenue decreased by 9% compared to the same period in 2023. Revenue from the automotive division decreased by 13%, to $17.38 billion.

The company sold fewer cars (-9%) in the first quarter even after cutting prices, and in April it became known that the automaker plans to reduce its workforce by at least 10%. Tesla also wants to accelerate the start of production of lower-cost electric vehicles - the first of them are expected to roll off the assembly line in early 2025, and maybe as early as the end of 2024.

Musk's surprise visit to China is a game-changer, Wedbush Securities senior analyst Dan Ives said in an interview with Bloomberg Television. “This could make FSD available in China, which could really be a golden opportunity for them,” the expert added.

Obtaining a mapping services license allows Tesla to legally deploy its FSD software on Chinese roads, allowing fleets to collect data on road layouts, road signs and nearby structures.

It is worth noting, that Baidu and Tesla began collaborating in early 2020, when Tesla had already integrated Baidu's navigation map into its cars in China. As required by Chinese law, all information collected by Tesla's fleet of vehicles is now stored locally in national data centers and is not sent to its overseas headquarters in the United States.

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