Summary
⚈ China has introduced tighter regulations that may hinder Tesla’s autonomous driving rollout.
⚈ Elon Musk’s return has boosted investor sentiment despite ongoing challenges.
Goldman Sachs (NYSE: GS) analyst Mark Delaney has reiterated a ‘Neutral’ rating on Tesla (NASDAQ: TSLA), citing early promise in its China FSD update but raising concerns over sporadic lane errors and challenges with local traffic rule adaptation.
In an investor note on Tuesday, May 6, Delaney set TSLA’s share price target of $235, implying a downside of almost 20% from the previous session’s closing value of $280.
The analyst emphasized that while the electric vehicle (EV) giant’s efforts to deploy FSD using minimal localized data in China are noteworthy, the technology’s refinement and regulatory hurdles in the region remain key variables.
Delaney noted that on February 25, 2025, media reports confirmed Tesla’s update for Chinese owners with the $8,750 FSD package, which offers features like automatic lane changes, traffic light recognition, and turn navigation.
However, early reviews reveal issues, including confusion near bike lanes and lane positioning errors, highlighting the challenges of adapting a U.S.-trained artificial intelligence (AI) system to China’s complex road conditions.
“Initial reviews indicate FSD in China has performed relatively well despite limited data collection, though some note issues such as confusion around local traffic rules (e.g., entering bike lanes on turns) and sporadic lane errors,” the analyst said.
Tesla’s regulatory uncertainty in China
Complicating matters further, media reports suggest that China may tighten rules regarding the testing and promotion of smart driving features, potentially increasing regulatory headwinds for Tesla.
Delaney stressed that Tesla’s success with FSD in China depends on continuous technological improvements and cost reductions.
Scaling these advancements will be key to its long-term autonomy prospects, both locally and globally. However, tightening regulations may complicate Tesla’s efforts.
Looking ahead, Tesla’s robotaxi service in Texas, slated for June 2025, could offer a cost advantage, with a global COGS of $35,500 per vehicle in Q1 2025.
However, the analyst noted that any robotaxi plans in China would face stiff competition, and success would depend on technological progress, cost advantages, and regulatory approval.
The cautious outlook from Goldman Sachs comes as investor optimism in Tesla has started to grow after CEO Elon Musk announced his return to a more active role at the company, stepping back from his government position.
Reportedly, Musk’s prior involvement with the Department of Government Efficiency had led the Tesla board to consider beginning the search for a new CEO.
Wedbush Securities’ Dan Ives has welcomed his return to the firm and dismissed the leadership drama surrounding the Texas-based company.
Featured image via Shutterstock
