Tesla CEO Musk arrived in the Chinese capital on Sunday where he was expected to discuss the rollout of Full Self-Driving (FSD) software and permission to transfer driving data overseas, according to a person with knowledge of the matter.

The billionaire's whirlwind visit, during which he met with Chinese Premier Li Qiang, came just over a week after he scrapped a planned trip to India to meet with Prime Minister Narendra Modi, citing "very heavy Tesla obligations".

On Monday, two separate sources told Reuters Tesla had reached an agreement with Baidu to use the Chinese tech giant's mapping license for data collection on China's public roads, which they described as a key step for FSD to be introduced in the country.

And a top Chinese auto association said on Sunday Tesla's Model 3 and Y cars were among models that it had tested and found to be compliant with China's data security requiremnts.

Data security and compliance have been key reasons why the U.S. electric vehicle maker, which rolled out the most autonomous version of its Autopilot software four years ago, has yet to make FSD available in China, its second-largest market globally, despite customer demand.

Chinese regulators had since 2021 required Tesla to store all data collected by its Chinese fleet in Shanghai, leaving the company unable to transfer any back to the United States.

Musk is looking to obtain approval to transfer data collected in the country abroad to train algorithms for its autonomous driving technologies, the person said.

Musk's visit to China, first reported by Reuters, was not flagged publicly and the person spoke on condition of anonymity because they were not authorised to speak with media.

The plane that Musk arrived on departed from Beijing Capital Airport at 0517 GMT, according to Chinese flight tracking app Flight Manager and was headed to Anchorage, Alaska.

Tesla did not immediately respond to a request for comment on Musk's departure.

Equity analysts at Wedbush called the surprise visit "a major moment for Tesla."

Rival Chinese automakers and suppliers such as XPeng (9868.HK) and Huawei Technologies (HWT.UL) have been seeking to gain an advantage over Tesla by rolling out similar software.

Retired newspaper commentator Hu Xijin said on his Weibo account that Tesla was the only foreign-funded automaker to meet China's data compliance requirements and said that this would pave the way for Tesla cars to enter premises owned by government agencies and state-owned firms across China.

"This is not only a breakthrough in China, but also a significant demonstration for the entire world in solving data security issues," he said.

Premier Li on Sunday praised Tesla's development in China as a successful example of U.S.-China economic and trade cooperation.

CHINA DATA

Tesla cars have for years been banned from entering Chinese military complexes over security concerns relating to cameras installed on its vehicles. Its cars have also been turned away from sites holding important political events, such as an annual summer leadership conclave the ruling Communist Party held in 2022.

He Xiaopeng, the CEO of XPeng whose XNGP Advanced Driver Assistance System is similar to FSD, said on his Weibo account he welcomed the entry of the Tesla technology into China.

"Only with the entry of more good products and technologies can the experience of the entire market and customers be improved, and it will allow the market's development to accelerate in a healthy manner," he said.

"Let a hundred flowers bloom," he said, echoing a famous line from Chairman Mao Zedong, the founder of modern China.

The improved prospect of FSD entering China comes as Tesla shares have lost almost a third of their value since the start of the year, as concerns have grown about the EV maker's growth trajectory. Last week, Tesla reported its first decline in quarterly revenue since 2020, when the COVID-19 pandemic slowed production and deliveries.

Musk said last week that Tesla would introduce new cheaper models using its current EV platforms and production lines and would offer a new "robotaxi" with self-driving technology. He said on X this month that he would unveil the robotaxi on Aug. 8.

China's complicated traffic conditions with more pedestrians and cyclists than in many other markets provide more scenarios that are key for training autonomous driving algorithms at a faster pace, according to industry experts.

"If Musk is able to obtain approval from Beijing to transfer data collected in China abroad this would be a 'game changer' around the acceleration of training its algorithms for its autonomous technology globally," Wedbush analyst Dan Ives said in a note.

Musk said this month that Tesla may make FSD available to customers in China "very soon," in response to a query on X.

Besides meeting Li on the short trip to Beijing, Musk met the organiser of the ongoing Beijing auto show. The chairman of Chinese battery giant CATL (300750.SZ) Robin Zeng, a key Tesla battery supplier, also visited Musk's hotel on Monday, according to a Reuters witness. Reuters could not immediately confirm with CATL if Zeng met with Musk.

Musk had been set on his cancelled India trip to announce $2 billion to $3 billion in new investments, including in a car plant, after India offered lower import taxes on EVs in return under a new policy.