• After years of delay, Tesla has finally deployed city road Navigate on Autopilot (City NOA) features in China.
• However, the performance has to be improved and the high price is a disadvantage.
• The introduction of FSD in China brings not only competition in the field of intelligent driving, but also competition in the AI industry.

Tesla has updated its full self-driving (FSD) intelligent driving software in China to add a city roads autopilot function, a much-anticipated move after years of delay. The new FSD function will enable Tesla vehicles to recognize traffic signals and drive straight, turn left and right, make U-turns, and change lanes automatically on city roads according to the navigation route. The upgrade is currently only available for FSD service subscribers with the required HW 4.0 hardware-capable models. Owners of older HW 3.0 models will have to wait longer.

Compared to closed highways, the implementation of the city road Navigate on Autopilot (City NOA) is significantly more challenging. The diverse road designs, irregular lane markings, and unpredictable behavior of pedestrians and two-wheelers in urban areas pose substantial obstacles to the realization of City NOA functions. To differentiate it from basic L2 features, City NOA is also marketed as Level 2.9 ADAS system in the China market. The numerical designation indicates its closeness to Level 3, which is true autonomous driving that has not yet been formally permitted by Chinese regulations.

However, Tesla’s autopilot function is not a novel concept in China as Chinese consumers have already been exposed to Level 2.9 ADAS features through domestic OEM products. The local pioneers in the field of intelligent development such as Li Auto, XPeng, and NIO started to widely promote products with L2.9 capabilities in 2023. Meanwhile, vehicles designed in collaboration with Huawei positioned intelligent driving as their biggest selling point. BYD unveiled its latest city and highway NOA solution to accelerate smart driving adoption on more affordable models. In 2025, intelligent driving has become an even greater focus of competition in the Chinese market. The rapid development of domestic Chinese automakers has eroded Tesla's leading position in China's new energy vehicle market, according to Counterpoint Research’s Global Passenger Electric Vehicle Model Sales Tracker, Q4 2024. Nevertheless, this update is timely and has potential to bring Tesla back to the center of the competitive stage.

Constrained by data security and technology protection, the Chinese version of Tesla’s FSD features is not as powerful as that deployed in the US, especially in adapting to China's local traffic rules and driving habits. Users jokingly refer to the situation as an experienced US driver driving in China for the first time. However, compared to the shortcomings in functionality, the pricing aspect places Tesla far behind its Chinese competitors. In the Chinese market, Tesla’s FSD costs RMB 64,000 (~$8,800). In contrast, Chinese automakers prefer including the cost of intelligent driving in the price of the new vehicle. Buying a car with intelligent driving included for free has proven to be the successful business ecosystem for intelligent driving products in China. Therefore, if Tesla wants to replicate its success of the US market, it needs to further adapt to the Chinese market not only in terms of technology and products, but also in terms of business model.

As an extension of artificial intelligence (AI) applications, automated driving is not only the focus of competition in the automotive market, but it also reflects the trend of the AI industry. The success of Tesla's FSD v12 version demonstrated the application of end-to-end architecture in the intelligent driving algorithm, signifying the adoption of the latest AI technology. China’s leading automakers have quickly caught up and further announced their exploration in the fields of Vision-Language Models (VLM) and World Models, which are the cutting-edge AI advancement, to improve model training and performance. Like Tesla, Xpeng and Li Auto have both shifted their strategies to increase focus on AI, while Huawei and Xiaomi have strengthened their positions in the upstream computing power and cloud services, and downstream device ecosystems of the AI sector, respectively. As an AI company, Tesla will also face challenges from local Chinese enterprises in terms of AI capabilities.

Intelligent driving involves every aspect of the AI ecosystem, including computing power, algorithms, and data. Intelligent driving serves as the key lever to unlock the potential of both automotive and AI industry. We believe that more advanced AI technologies will be applied to intelligent driving in the future. Moreover, advancements in perception, prediction, and planning capabilities within the intelligent driving technology stack will have broader applications across various fields.