Tesla stock slips ahead of Musk's trip to China with Trump trade delegation

After a string of gains, Tesla (TSLA) stock slipped on Tuesday ahead of CEO Elon Musk’s trip to China with President Trump on Thursday.

Tesla stock jumped last week as tech rebounded and the company announced its latest plans to begin its chip fabrication plant, dubbed the Terafab, in Austin. On Monday, Piper Sandler analyst Alexander Potter published his guide to investing in Tesla, claiming that at the $400 price level, shareholders were getting the Optimus humanoid robot business for free.

After nearly touching $450/share on Monday and gaining nearly 15% over the past five trading sessions, Tesla stock slipped in early trade on Tuesday.

This comes as President Trump invited US company CEOs like Musk, Boeing’s Kelly Ortberg, and Apple’s Tim Cook to join him for meetings this week with China President Xi Jinping. US and China trade delegations will also meet to hammer out trade deals and other agreements, coming on the back of Trump’s trade war with China, and subsequent retaliatory duties imposed by Beijing.

For Tesla, the likely main point of negotiation is the company’s FSD (full-self driving) software and its approval on the mainland.

Musk had previously suggested February or early spring for FSD approval in China, but that deadline came and passed. On the company’s Q1 earnings call, the company targeted a third quarter timeline for approval, but again, there are no guarantees it will happen.

Chinese authorities are more cautious when it comes to self-driving and autonomous vehicles, and recent issues with Baidu (BIDU) autonomous vehicles stopping in the middle of streets has authorities reportedly pausing autonomous vehicle licenses.

BYD’s (BYDDY) God’s Eye self-driving system has also faced criticism from its own clients, who have reported it functioning erratically and dangerously.

While Tesla’s FSD is considered to be more advanced that BYD’s, the company still needs regulatory sign off in light of recent issues.

Approval of FSD would be a major feather in its cap for Tesla, as it attempts to claw back market gains in the competitive Chinese auto market.

Tesla sold 25,956 vehicles in China in April per the China Passenger Car Association (CPCA), down nearly 10% from a year ago. Tesla’s share of China’s new-energy vehicle market (which includes both EVs and hybrids) fell to 3%, while its EV share slipped to 4%.

Tesla watchers point out that the first month of the quarter typically is used to fulfill exports from Giga Shanghai, with the later months production meant for domestic shipments. Nevertheless, approval of FSD for Tesla EVs would be a major competitive advantage for Tesla against the likes of Xiaomi (XIACY), BYD, Geely (GELYF), and others.