One company that constantly finds its name in the spotlight is Tesla (NASDAQ: TSLA). The company’s CEO, entrepreneur Elon Musk, is equal parts entertaining and, at times, pretty jarring.

To be blunt, 2024 hasn’t been kind to Tesla shareholders. While most of the company’s “Magnificent Seven” peers have generated nice share price gains so far this year, Tesla shares are down about 23% as of this writing.

Nevertheless, after showing some signs of maturity and providing investors with thorough updates during the first-quarterearnings calllast week, shares in Tesla rebounded slightly.

Over the weekend, news broke that Musk flew to China to meet with government officials — namely, Premier Li Qiang. Since the meeting on April 28, Tesla stock extended its post-earnings rebound by rocketing 14%.

Let’s break down why this meeting was so important for Tesla, and what it could mean for investors in the long run.

Musk’s focus on self-driving cars is clear

The last year has been brutal for Tesla. Unusually high inflation and rising interest rates weighed heavily on the economy and caused consumers to scale back spending. Considering Tesla’s electric vehicles (EV) are more of a luxury purchase, the company has struggled to sell more cars during these periods of prolonged economic challenges.

One of the ways that Tesla is trying to entice people to buy their cars over the competition is the company’s autonomous driving capabilities. Although Tesla’s Full Self Driving (FSD) technology appears to be making some notable progress, there is still a lot of work to be done before it’s commercialized at scale.

This was the impetus for Musk’s trip to China.

The EV market in China is ripe with competition from Nio, Li Auto, BYD, Tesla, and more. Yet despite the intense landscape, Tesla has made notable strides against its Chinese peers. However, one of the toughest barriers to Tesla’s progress in China has been regulatory hurdles surrounding self-driving technology.

Image source: Getty Images.

A big step forward for Tesla

During Tesla’s first-quarter earnings, George Gianarikas of Canaccord Genuity asked Musk specifically about FSD in China. While Musk remained somewhat tightlipped, he did share that the plan for FSD is to release the technology “where we can get regulatory approval for that, which we think includes China.”

It seems that he wasted no time trying to make good on that outlook. Following Musk’s discussion with regulators, Reuters reported that Tesla and Baidu have agreed to initial terms for the implementation of FSD in China.

Although details surrounding the partnership are sparse, Reuters reported that Tesla will be leveraging Baidu’s mapping license for FSD. In essence, Tesla’s vehicles collect and store myriad data points such as road designs, traffic patterns, neighborhood layouts, and more in order to develop autonomous driving.

By accessing Baidu’s mapping database, Tesla should make significant strides in its FSD platform — which it hopes to integrate into its vehicles in China.

It’s not a done deal just yet

There are still some important security details about this deal that are not yet publicly known. For example, it is not entirely clear if Tesla or Baidu will be storing the driver data that is being collected to develop FSD in China.

Nevertheless, I see this development as an important milestone for FSD and Tesla’s international growth. Furthermore, should Tesla begin implementing FSD into its cars in China at scale, this would be a major differentiator over competing auto manufacturers and autonomous driving software developers.

However, I’d caution investors from buying into the momentum fueling Tesla stock based on this news alone. Rather, I’d think about the bigger picture here. Just a couple of weeks ago, Musk hinted that some big news is coming this summer regarding the company’s self-driving car fleet, dubbed Robotaxi.

Since then, investors have learned that FSD has collected more than 1.3 billion miles of driver data. Now, news is unfolding that Musk continues to be laser-focused on FSD’s proliferation — both domestically and abroad.

I think the prudent thing to do is to monitor Tesla’s progress in autonomous driving technology relative to peers. Moreover, if management sheds light on the company’s progress in China over the coming quarters, it could be worth scooping up some shares in Tesla.

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Adam Spatacco has positions in Tesla. The Motley Fool has positions in and recommends BYD, Baidu, Nio, and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.