Tesla's China Deal Is A Dead End
Too little, too late.
Over the past few days, the media has been buzzing over Tesla’s latest deal with Baidu, China’s version of Google, and how it could save Tesla from its self-inflicted downward spiral. You see, Baidu has agreed to supply Tesla with its lane-level navigation system, enabling Tesla to obtain a mapping qualification and legally sell its Full Self Driving (FSD) system in the Chinese market. Despite its misleading name, FSD isn’t a self-driving system, as it requires constant human oversight and intervention. As such, it’s actually a driver assistance system. So those headlines claiming Teslas in China will be self-driving soon are wrong. In spite of this, the news pushed Tesla’s stock up 17%, a welcome break from its catastrophic nosedive over the past few months. So, is this deal going to save Tesla? Well, when you dig a little deeper, it becomes evident that it can’t.
Let’s start with FSD’s numerous problems.
I have written numerous articles on whistleblowers, government investigations and lawsuits demonstrating how dangerous and incapable FSD is. It’s not just that Musk markets it as a fully fledged self-driving system in all but legal terms, leading to rampant misuse, crashes and fatalities. It’s the fact that, statistically, FSD poses a fatal risk to motorists. A recent analysis of Tesla’s own data revealed that FSD causes at least twice as many deaths per distance travelled as human drivers, and at most ten times! It’s no wonder a DoJ investigation into Tesla has the potential to charge both Tesla and Musk with negligence and manslaughter.
These issues are reflected by FSD customers. You see, according to Tesla’s own data, US Tesla owners who have bought FSD only use it 15% of the time. They simply don’t trust the system. Moreover, as the reports of how inept FSD is pile up, the system’s sales have fallen short of Musk’s expectations. As such, he recently slashed the price of FSD in half to get more customers buying FSD. This goes completely against Musk’s own predictions that FSD’s actual worth is “somewhere over $100,000 per car.”
So, why is FSD so bad? Well, back in 2021, Elon overruled his own engineers and removed all self-driving sensors from Teslas apart from the cameras. Without lidar, radar, or ultrasonic sensors, FSD could only use complex computer vision to understand the world around it. Not only is this less accurate than having the other sensors, but it also leaves the entire system with no redundancy. This means that if the computer vision misreads the road or traffic, there are no checks in place to correct the mistake, such as lidar data. It also means that if the cameras are rendered unusable, with dirt, water, and sudden changes in light or glare, then FSD is driving blind. Tesla engineers have actually come forward and stated that this switch made FSD and Autopilot significantly less safe and less capable.
So, FSD is a dangerous product that is failing to sell well enough in the US market to the point where Tesla has to aggressively cut its price. Just a reminder here that Tesla has spent tens of billions developing FSD, so having to cut its price in half represents a colossal loss of potential income. So why would offering this product in a different market change any of this?
The simple answer is: It won’t.
Particularly when you consider that Tesla’s main rival, BYD, is miles ahead of them here.
BYD recently overtook Tesla as the world’s largest EV manufacturer, which is impressive when you consider they only really have a significant presence in China. For years, BYD didn’t focus on self-driving or automation, but on developing battery and manufacturing techniques. This focus yielded brilliant results; even Tesla uses BYD’s blade battery over its own, 4680 cells in some of its cars. But over the past two years, they have rapidly developed self-driving systems and have leapfrogged Tesla.
BYD now has 2.6 million vehicles on the road with level 2 automation. This means the car controls the throttle and steering, but the driver must still have their hands on the steering wheel and be ready to intervene at all times. As such, FSD is actually classed and sold as a level 2 system. In January, BYD launched their Xuanji system, which expanded this capability to include functions like automated parking through better AI architecture and a more extensive suite of sensors. This is still slightly behind Tesla’s FSD in terms of capability (i.e. it can’t navigate junctions). However, this system should enable BYD to offer higher level 2 automation as it is developed, which means that BYD’s automation systems will likely be much safer than Tesla’s. But that isn’t where BYD has overtaken Tesla.
Last July, BYD obtained a licence to test level 3 automation on high-speed roads, making it the first car company to receive such a licence in China. Level 3 is where, under certain situations, the driver can take their hands off the steering wheel and eyes off the road. They have also adopted Nvidia’s Hyperion 9 system for these cars. This system has a brilliantly optimised AI computer along with 14 cameras, 9 radars, 3 lidar sensors, 20 ultrasonic sensors outside the vehicle, and 3 cameras and one radar inside the car. These extra sensors enable the AI to better understand the environment around it and more reliably ignore and correct for anomalies that would completely throw off FSD.
As such, by partnering with an AI giant that has been developing its own self-driving technology for years, ensuring the cars have ample sensors of multiple types, and obtaining a level 3 licence, BYD has everything it needs to deliver a level 3 self-driving car before Tesla. In fact, Nvidia has stated that Hyperion 9 will be on the market by 2026, and I can bet you it will be with BYD in China.
Meanwhile, Tesla has yet to get a level 3 licence; in fact, they are likely miles away. It has taken them years to obtain their recent breakthrough licence, and level 3 test licences are incredibly hard to get in China. Hence, BYD is the only manufacturer that currently has one.
So, why would Chinese buyers buy a Tesla over a BYD? BYD cars are significantly cheaper and have better specs. They also have inherently safer automation thanks to redundant sensors, and they will be able to offer a higher level of automation in the near future. Or, they could spend the extra money and buy a Tesla and then spend even more money buying FSD and have a car, which is statistically unsafe. So, Tesla’s ability to offer FSD in China will not change its fortune. You see, FSD can’t save Tesla. Musk shot it in the head in 2021. As such, I’m not sure that Tesla can compete with BYD and its other rivals without scrapping its current self-driving program and starting over again.
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Sources: BBC, FT, The Independent, Reuters, SCMP, Reuters, CNBC, Asia Financial, Planet Earth & Beyond, Planet Earth & Beyond, SMM, Will Lockett, Will Lockett