Tesla’s shares have jumped after reports the firm has cleared an important regulatory hurdle in China by partnering with search giant Baidu.
The reports come after chief executive Elon Musk made a surprise visit to meet the country’s number two leader, Premier Li Qiang.
The deal with Baidu brings Mr Musk a step closer to rolling out Tesla’s self-driving technology in China.
Wedbush analyst Daniel Ives said it was “a watershed moment”. Tesla has been contacted for comment. Baidu declined to comment.
Mr Ives said the company faces “massive domestic electric vehicle competition in China along with softer demand”, but that its “long-term valuation story” depends on it also getting approval for fully autonomous driving.
The agreement with Baidu that is being reported would allow Tesla to go ahead with some autonomous driving technology in China.
Baidu’s mapping and navigation services would aid Tesla’s self-driving technology, including assisted parking, but full autonomous technology would still require further approval.
Tesla is one of the world’s largest electric car manufacturers, and China is its second biggest market, but it has yet to launch autonomous driving there as it has in other countries, such as the US.
Mr Musk strongly believes that autonomous driving is the future.
“If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor,” he has previously said.
However, even in the US, autonomous cars face challenges and further regulatory hurdles.
Tesla’s autopilot allows drivers to hand control to the vehicle’s AI, but it still needs constant human oversight.
Despite this precaution, misuse of the technology has been fatal.
Last Friday, the US auto regulator opened a probe into the “adequacy” of a software update Tesla made to try to fix problems with its autopilot feature.
The agency said “foreseeable driver misuse of the system played an apparent role” in at least 13 Tesla crashes, including at least one death, and many more involving serious injuries.
In December, a former Tesla employee told the BBC he did not believe the technology powering the firm’s self-driving vehicles was safe enough to be used on public roads.