Elon Musk traveled to Beijing this week as part of President Donald Trump's business delegation, intensifying Tesla's push to expand its Full Self-Driving (FSD) system in China. The visit underscores the critical importance of the Chinese market to Tesla's future growth, as the company seeks regulatory approval to roll out its driver-assistance software more broadly.
Market Reaction and Valuation
Tesla shares ended U.S. trading nearly unchanged at $445.13, with a market capitalization of approximately $1.57 trillion. The stock touched an intraday high of $451.99 before settling. Investors continue to price in optimism around Tesla's autonomy story, even as demand for its core electric vehicles softens and competition intensifies.
China's Strategic Importance
China accounted for roughly 20% of Tesla's total revenue last year, with the company delivering about 626,000 vehicles there, making it the country's fifth-largest seller of electric and plug-in hybrid cars. The market's significance is amplified by Tesla's strategic shift toward software subscriptions, robotaxis, and autonomous driving as key revenue drivers beyond traditional EV sales.
European Developments
In Europe, Tesla received approval from Belgium to conduct supervised self-driving tests with a single vehicle in the Flanders region. The pilot program, spanning approximately 5,000 kilometers, aims to evaluate how FSD handles Belgian roads and traffic laws. This follows provisional approval from the Netherlands last month. However, European regulators remain cautious, with internal emails revealing concerns about FSD's handling of speed limits, performance on icy roads, and whether the "Full Self-Driving" branding could mislead drivers. Any EU-wide approval requires backing from member states representing at least 55% of the bloc and 65% of its population.
Regulatory and Competitive Landscape
China's regulatory environment presents both opportunities and challenges for Tesla. Local EV brands are aggressively competing on price and technology, and Chinese tech companies like Xiaomi are also vying for attention. Musk's star power in China may wane as domestic players close the gap or surpass Tesla in certain areas, according to industry observers. Nonetheless, Beijing's priorities in electric vehicles, autonomous driving, AI, and humanoid robots align closely with Musk's interests, as noted by analysts.
U.S. Robotaxi Setbacks
Tesla's robotaxi service in the U.S. has faced operational hurdles. In tests across Dallas and Houston, reporters experienced long wait times, few available cars, cancelled rides, and imprecise drop-offs. The service is currently limited to Dallas, Houston, and Austin—far from Musk's earlier promise of robotaxis serving half the country by the end of 2025.
Capital Expenditure and Investment
Capital spending remains elevated. Tesla now expects to invest over $25 billion in capital projects through 2026, up from a previous target of "above $20 billion," covering factories, chips, and other large-scale initiatives. CFO Vaibhav Taneja described the current period as a "very big capital-investment phase," with negative free cash flow likely persisting through the end of 2026. Concurrently, Tesla invested nearly $250 million more in battery cell production at its Gruenheide site near Berlin, targeting an annual capacity of 18 gigawatt hours—more than double the previous goal—and creating over 1,500 jobs.
Outlook
Beijing has opened the door for discussions, but regulatory approval for FSD expansion remains pending. Tesla's software must demonstrate safe scalability in China and beyond before rivals and regulators close in. The stock continues to reflect high expectations for autonomous driving, but execution risks persist.
