Musk advocates for utilizing China’s self-driving data to enhance Tesla’s AI endeavors

SHANGHAI/SINGAPORE — Tesla is moving forward with plans to advance the global development of its self-driving system using data from China that could be processed within the country, part of a strategic shift by Elon Musk, according to sources familiar with the work.

Tesla has been working on developing a data center in China to train the algorithm needed for more advanced autonomous vehicles, according to insiders who wished to remain anonymous due to the confidential nature of the work.

Recently, Tesla has been seeking approval from Chinese regulators to transfer data generated by its electric vehicles in China for its “Full Self Driving” (FSD) system, according to sources familiar with the matter.

Tesla’s efforts highlight the company’s quick pivot to focus on AI breakthroughs amidst slowing demand for electric vehicles and increased competition.

The company’s push to utilize data from vehicles in China for AI development comes at a time when the U.S. government is restricting the transfer of AI technology from U.S. companies to China.

Tesla has not been able to offer the full version of FSD in China due to regulatory constraints.

Expanding the market for FSD in China could boost Tesla’s revenue and profits, especially in the face of competition from Chinese automakers like BYD.

Tesla did not respond to requests for comment.

Establishing a data center in China for FSD development would involve partnering with a Chinese entity, according to sources. Additionally, there may be challenges in sourcing hardware for the data center.

Tesla has explored discussions with Nvidia about acquiring graphic processing units for a China data center, sources briefed on the matter revealed. However, U.S. sanctions restrict Nvidia from selling its most advanced chips in China.

In a recent visit to Beijing, Elon Musk engaged with Chinese officials to facilitate permissions for Tesla’s data transfer and discussed the potential of investing in a data center in China.

Musk also explored the idea of licensing Tesla’s FSD systems to Chinese EV manufacturers, sources disclosed.

China, as the largest car market in the world, presents significant opportunities for collecting valuable data from sensor-equipped vehicles in congested urban areas with complex traffic patterns.

Some analysts believe Musk is positioning China as a launchpad for self-driving technology, similar to how Tesla’s Shanghai Gigafactory facilitated its mass-market electric vehicle production.

“China had played a key role in scaling up EV production for Tesla with the Shanghai factory. It would again serve a significant part in scaling up mass adoption of autonomous driving technologies,” said an industry expert.

Many industry experts project that it will take several years before fully autonomous vehicles become mainstream, with varying predictions.

While driver-assistance features currently available in China are at “level two” requiring driver intervention, Tesla’s FSD and Autopilot systems also necessitate attentive drivers.

Several automakers, including Baidu and Pony.ai in China, are testing more automated vehicle fleets in limited zones.

While some automakers have approval to transfer data out of China, none have authorization to use the data for training AI systems, according to reports.

Concerns about penalties for violating data privacy laws in China are cited as a significant risk for data operations by foreign business groups.

During a call with investors, Musk emphasized Tesla’s focus on AI and expressed confidence in the adaptability of the FSD system across various markets.

The China effect

“It would definitely be a milestone for Tesla if it rolls out FSD in China and leverages the China data for algorithm training,” said an industry expert.

Many industry experts expect it will take years before fully autonomous cars are commonplace, but predictions vary widely.

Driver-assistance features now offered in China are “level two” systems, meaning they require a driver ready to take over. Tesla’s FSD and its less-advanced options of Autopilot, are also level-two systems requiring attentive drivers.

More fully automated vehicle fleets operated by Baidu, China’s biggest search engine operator, and Pony.ai, an autonomous driving startup, run in limited test zones.

But China’s EV makers, including BYD, have made self-driving and advanced driver assist systems a priority. Mercedes and BMW have been granted licenses to test level-three systems that allow drivers to take their hands off the wheel and look away on a wider range of roads in China.

At least five automakers — Hyundai, Mazda, Toyota, Volkswagen and Nissan — have approval to transfer some of their data out of China, but none of those approvals are for data to be used to train AI systems, according to lawyers, state media reports and analysts.

Penalties for violating data privacy laws that came into effect in China in 2021 are a major risk factor for data operations, groups representing foreign businesses in China say.

When asked about competition from Chinese EV makers during a call with investors after Tesla’s quarterly earnings last month, Musk said Tesla should be viewed more as an AI company.

He said he was confident Tesla’s FSD system would work “pretty well without modification in almost any market”. It would work better with “country-specific” training, Musk said.