Tesla Inc. (NASDAQ: NASDAQ:TSLA) is boosting its artificial intelligence ambitions by tapping into data from electric vehicles (EVs) in China, with plans to potentially set up a data center in the country to train its Full Self-Driving (FSD) algorithms. This strategic move by CEO Elon Musk could see the company process valuable data in China, a shift from previous efforts to move this data out of the country.
Developing a data center in China would require Tesla to partner with a local partner and navigate potential hardware sourcing challenges, including negotiations with Nvidia (NASDAQ:NVDA) of graphics processing units, despite US sanctions restricting sales of advanced chips in China.
Tesla’s initiative comes as the company faces growing competition in the Chinese market, particularly from domestic EV maker BYD (SZ: 002594), and as the U.S. government tries to limit the transfer of AI technology to China. The automaker has yet to offer a full version of FSD, which costs nearly $9,000, in China, which could significantly boost its sales and profits.
During a trip to Beijing last month, Musk met with Chinese officials, including Premier Li Jing, to discuss data transmission rights and potential investment in a local data center. He also explored licensing Tesla’s FSD technology to Chinese EV makers. China’s role in Tesla’s strategy is crucial, given its position as the world’s largest auto market and its fleet of sensor-equipped vehicles that provide data from complex traffic environments. This data is essential for training AI systems for autonomous driving.
Tesla has been storing data from its Chinese electric vehicles in Shanghai since 2021 and is seeking regulatory approval to transfer that data overseas. A pilot project in Shanghai’s Lingang area, where Tesla’s factory is located, now allows certain data to be transferred without additional security reviews.
While fully autonomous vehicles may still be years away, with current systems in China classified as “level two,” requiring driver supervision, some companies are testing more advanced systems. Mercedes and BMW (ETR: BMWG), for example, have licenses to test “level three” systems in China, which allow for more hands-free driving.
Other automakers, including Hyundai (OTC: HYMTF), Mazda, Toyota (NYSE: TM), Volkswagen (ETR: VOWG_p) and Nissan (OTC: NSANY), have received approval to move some data out of China, although not for AI training purposes. Musk has positioned Tesla as an AI company, expressing confidence in the ability of the FSD system to operate effectively across markets, with performance improving through country-specific training.
Source: Investing
