Chinese EV maker Xpeng is embracing competition with Tesla as the American automaker prepares to launch its Full Self-Driving (FSD) technology in China during Q1 2025. Speaking at the Paris Motor Show on Monday, Xpeng co-president Brian Gu expressed enthusiasm about comparing the company’s autonomous driving capabilities against Elon Musk’s AI-powered system.
“It is good news for us. You need competition to expand the field,” Gu stated, noting that while Xpeng cannot currently compete in the US market due to prohibitive tariffs, having Tesla’s FSD in China will allow direct comparison. “If they are in China, we can compete side by side and learn from them, and they can learn from us and help the market,” he added.
Tesla is reportedly close to receiving regulatory approval to sell its Full Self-Driving technologies in China, marking a significant expansion for the company’s AI-driven autonomous vehicle capabilities. The move will intensify competition in China’s already crowded autonomous driving market, where numerous EV manufacturers are marketing their own AI-powered self-driving systems.
Xpeng’s City Navigation Guided Pilot (NGP) system is already available throughout China and offers capabilities comparable to Tesla’s FSD, including overtaking, traffic signal recognition, and autonomous lane changes. The Guangzhou-based startup has positioned itself as a direct Tesla competitor, recently unveiling aggressively priced vehicles that undercut Tesla’s offerings.
The company’s Mona M03 is priced at approximately half the cost of Tesla’s Model 3 in China, while the newly announced P7+ electric sedan features AI and autonomous driving capabilities starting at 209,800 yuan ($29,600), compared to Tesla’s Model 3 starting price of 231,900 yuan ($32,700) in China.
However, Xpeng faces significant challenges in Western markets. President Biden’s 100% tariff on China-made EVs, announced in May 2024, has effectively blocked the company from the US market. The EU has also imposed additional levies of up to 35.3% on Chinese automakers. Gu acknowledged these tariffs represent “a direct hit on our margin, which is already not very high,” and said the company is considering establishing manufacturing operations in Europe to mitigate the impact.
Despite international headwinds, Xpeng has enjoyed booming sales in China’s red-hot EV market, posting record monthly deliveries in September. The company, known for side ventures into flying cars and humanoid robots, remains committed to Europe as a “long-term opportunity.”
Key Quotes
It is good news for us. You need competition to expand the field … We obviously cannot go to the US at the moment to compete or compare there.
Xpeng co-president Brian Gu welcomed Tesla’s planned FSD launch in China, viewing it as an opportunity to benchmark their AI autonomous driving technology against a major competitor in their home market.
If they are in China, we can compete side by side and learn from them, and they can learn from us and help the market. It’s a bigger pie for all of us to enjoy.
Gu emphasized the collaborative competitive dynamic, suggesting that Tesla’s AI technology presence in China will benefit the entire autonomous driving ecosystem and accelerate market growth.
I think that the tariff will put a lot of pressure on our business model. It’s a direct hit on our margin, which is already not very high.
Addressing the EU’s tariffs of up to 35.3% on Chinese automakers, Gu acknowledged the significant financial challenges these levies pose to Xpeng’s international expansion plans.
Our Take
This story reveals a fascinating paradox in the global AI race: while geopolitical tensions create barriers to market access, they’re simultaneously fostering intense regional innovation. Xpeng’s confidence in competing directly with Tesla’s FSD suggests Chinese AI autonomous driving technology has matured significantly, potentially matching or exceeding Western capabilities in certain aspects.
The aggressive pricing strategy—offering AI-powered vehicles at half Tesla’s cost—demonstrates how Chinese companies are leveraging both technological prowess and manufacturing efficiency to dominate their home market. This could establish a template for AI technology deployment: advanced capabilities at accessible price points.
Most significantly, this competition will generate valuable real-world data on AI autonomous driving performance in China’s complex traffic environments, potentially accelerating breakthroughs in AI safety and reliability that benefit the global industry. The question remains whether fragmented markets will ultimately hinder or help AI development.
Why This Matters
This development highlights the intensifying AI arms race in autonomous driving technology, particularly in China, the world’s largest EV market. Tesla’s entry with its FSD system will provide a crucial benchmark for Chinese competitors’ AI capabilities and accelerate innovation in self-driving technology.
The story underscores China’s emergence as a global leader in AI-powered automotive technology, with domestic companies like Xpeng developing sophisticated autonomous driving systems that rival or potentially surpass Western competitors. This competition will likely drive rapid advancement in AI safety, reliability, and functionality.
The geopolitical dimension—with tariffs blocking Chinese EVs from Western markets—reveals how AI technology development is becoming fragmented along national lines. This could lead to divergent AI standards and approaches, impacting global technology integration. For consumers, the competition promises more affordable AI-powered vehicles and faster innovation, while for the industry, it signals that AI autonomous driving capabilities are becoming a critical differentiator in the increasingly competitive EV market.
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