Tesla Inc. (NASDAQ:TSLA) is reportedly advancing its strategy to enhance its self-driving system using data collected in China. The company, led by CEO Elon Musk, plans to process this data locally.

Until recently, Tesla sought approval from Chinese regulators to transfer vehicle data out of the country. The decision to develop a local data center reflects a strategic pivot, according to a report from Reuters.

Tesla has been developing plans for a data center in China to train its autonomous driving algorithms. This move aligns with a broader effort to secure local processing capabilities for its Full Self-Driving (FSD) system, the report further added.

The shift underscores Tesla’s rapid adaptation as it navigates a competitive electric vehicle (EV) market and aims for artificial intelligence (AI) breakthroughs. 

The initiative to leverage Chinese data for AI development comes amid U.S. restrictions on transferring AI technology to China. 

Tesla has faced challenges offering the complete FSD system, priced around $9,000, in China, but expanding this market could largely boost revenue and profits, per the report.

Setting up a data center in China will necessitate collaboration with local partners and could pose hardware procurement challenges. 

Tesla has engaged in discussions with Nvidia Corp (NASDAQ:NVDA) regarding graphics processing units, although U.S. sanctions limit the sale of advanced chips to China. 

Musk’s recent visit to Beijing, where he met with officials, including Premier Li Qiang, accelerated efforts to facilitate data transfer and explore the potential for a local data center. 

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Musk also discussed licensing Tesla’s FSD system to Chinese EV manufacturers, the report noted. China, the largest car market globally, offers a vast pool of data from sensor-equipped vehicles, making it a valuable resource for AI training.

As per the report, analysts consider leveraging Chinese data for FSD could mark a significant milestone for Tesla. The company has stored data in Shanghai since 2021 and recently began a pilot project allowing data transfer under certain conditions.

Despite competitive pressures, Musk remains confident in Tesla’s AI capabilities, emphasizing that the FSD system could perform well globally with country-specific adaptations.

Tesla stock has gained more than 0.5% in the last 12 months. Investors can gain exposure to the stock via ETFs, including Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY) and Fidelity MSCI Consumer Discretionary Index ETF (NYSE:FDIS).

Price Action: TSLA shares are trading lower by 0.10% at $174.66 in premarket at the last check Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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