Fanny Potkin
SHANGHAI/SINGAPORE (Reuters) – Tesla (NASDAQ:) is pushing ahead with plans to power the global development of its self-driving system with data from China that can be processed domestically, part of a strategic shift Elon Musk said. people who know their business.
As part of that effort, Tesla is developing plans to set up a data center in China to train the algorithm needed for more fully autonomous vehicles, according to the two people, who asked not to be identified because the work remains confidential.
Until recently, Tesla was focused on efforts to win Chinese regulators’ approval to transfer data generated by its electric vehicles in China outside the country for its Full Self-Driving (FSD) system, according to two of the people and another person with knowledge. this matter.
It’s unclear whether Tesla will use both options for handling self-driving car data from China – data transfer and a local data center – or whether it is developing parallel plans as a hedge.
Tesla’s efforts underscore the speed with which the electric vehicle maker is betting on breakthroughs in artificial intelligence at a time when demand for electric vehicles has slowed and competition among them has intensified.
Its push to more fully leverage vehicle data in China to develop the automaker’s artificial intelligence for driving comes as the U.S. government attempts to curb the transfer of artificial intelligence technology from U.S. firms to China.
Tesla was unable to offer the full FSD version in China, which costs the equivalent of almost $9,000.
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A broader market for FSD in China would provide a boost to the automaker’s revenue and profits at a time when both are under pressure from Chinese rivals such as BYD (SZ:).
Tesla did not respond to a request for comment.
Setting up a data center in China to develop FSD would require Tesla to collaborate with a Chinese partner, two of the sources said. There is also a potential problem with equipment selection.
The company was in talks with Nvidia (NASDAQ:) to purchase GPUs for a Chinese data center, according to one of the people briefed on the talks. US sanctions prohibit Nvidia and its partners from selling their most advanced chips in China.
Nvidia declined to comment on whether it was in talks with Tesla.
Tesla’s campaign to make greater use of data from China received a major boost during Musk’s whirlwind trip to Beijing last month, when he met with officials including Premier Li Qiang.
At the meeting with Lee, Musk tried to get permission to transfer data to Tesla, two sources said. The potential for Tesla’s data center investment in China was also raised, they said.
Musk has also discussed the possibility of Tesla licensing its FSD systems to Chinese electric vehicle makers, one person said. In April, Musk said Tesla was in talks with another “major” automaker to license FSD, without naming it.
China’s State Council Information Office did not respond to a request for comment.
CHINESE EFFECT
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China, the world’s largest auto market, has the largest fleet of sensor-equipped vehicles capable of collecting data from congested cities with complex traffic patterns, making the data generated there valuable to automakers and artificial intelligence providers.
Musk has previously expressed opposition to a data center in China, arguing that transferring data to the United States is the most efficient option, the two people said.
As of 2021, Tesla stores data collected by its Chinese electric vehicles in Shanghai. All along, Tesla’s Chinese team has been seeking approval from Chinese regulators to transfer data out of the country, two people said.
Under a one-year pilot project, companies in Shanghai’s Lingang district, where Tesla is located, will be allowed to share certain data without the need for further security assessment, Reuters reported on Friday.
Some analysts believe Musk is trying to make China a launch pad for self-driving in the same way Tesla’s 2019 bet on the Shanghai Gigafactory allowed it to break through as a mass-market electric vehicle maker.
“It will definitely be a major milestone for Tesla if it deploys FSD in China and uses Chinese data to train algorithms,” said Yale Zhang, managing director of Shanghai-based consultancy Automotive Foresight.
“China played a key role in the expansion of electric vehicle production for Tesla at the Shanghai plant. It will once again play a significant role in expanding the mass adoption of autonomous driving technologies,” he said.
Many industry experts expect it will be years before fully autonomous cars become commonplace, but forecasts vary widely.
Driver assistance features currently offered in China are “level two” systems, meaning they require a driver to be willing to take control. Tesla’s FSD and its less advanced Autopilot variants are also Level 2 systems that require attentive drivers.
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More fully automated fleets operated by Baidu (NASDAQ:), China’s largest search engine operator, and Pony.ai, an autonomous driving startup, are operating in limited test areas.
But Chinese electric vehicle makers, including BYD, have made autonomous driving and advanced driver assistance systems a priority. Mercedes and BMW (ETR:) have received licenses to test Level 3 systems that allow drivers to take their hands off the wheel and look at a wider range of roads in China.
At least five automakers – Hyundai (OTC:), Mazda, Toyota (NYSE:), Volkswagen (ETR:) and Nissan (OTC:) – have permission to transfer some of their data out of China, but none of those permissions are for data that will be used to train artificial intelligence systems, according to lawyers , say the media and analysts.
Fines for violating data privacy laws that took effect in China in 2021 are a major risk factor for data transactions, say groups representing foreign businesses in China.
Asked about competition from Chinese electric vehicle makers during a call with investors after Tesla’s quarterly earnings last month, Musk said Tesla should be viewed more as an artificial intelligence company.
He said he was confident Tesla’s FSD system would work “reasonably well without modification in almost any market.” According to Musk, this will work better with “country-specific” training.