Delays have occurred on Tesla’s end while trying to obtain permission for the Full Self-Driving technology in China. The trade war between the US and China worsened things. As described in Financial Times, it is very likely that the Chinese government is trying to use denial of self-driving Tesla cars as a covert bargaining tool with the US.

Tesla's CEO Elon Musk shared more concerns during a recent earnings call, saying, “They won’t allow us to move training video out of China, and then the US government won’t permit us to train in China. It’s a bit of a quandary.”

To effectively deal with the predicament, Tesla has resorted to non-direct collection methods by using publicly available videos of the Chinese street and simulation technology.

Even with all these obstacles, Musk is still hopeful to have self-driving cars operate without supervision in China by the end of next year. Musk’s aspirations for Tesla in China are exceedingly important as the local competition is getting harsher from companies such as BYD, which just recently came out with its own advanced driver assistance system.

Tesla has not had hurdles in China before. In 2022 the Chinese government placed prohibitions on the use of Tesla vehicles in specified regions due to national safety issues which included driving bans during important political meetings. All of these have considerably altered the business environment for Tesla in one of its most critical markets.

Tesla is also scaling up its production and has started to manufacture its updated Model Y at its gigafactory in Shanghai, and is expected to begin deliveries in the near future.

As the situation develops, investors and analysts are closely monitoring how these geopolitical dynamics will affect Tesla's operations and market position in China, particularly as competitors continue to innovate and capture market share.