This article first appeared on GuruFocus.
Tesla (NASDAQ:TSLA) is quietly switching gears in Chinaand it’s not just about batteries or bodywork. To keep pace with domestic EV rivals, the automaker is now integrating homegrown artificial intelligence from Bytedance’s Doubao and Deepseek into its in-car experience. The move gives drivers access to voice-controlled navigation, entertainment, and cabin controlsall hosted on Bytedance’s Volcano Engine cloud. It’s the kind of localized tech that Chinese consumers have come to expect, especially with competitors like BYD and Geely already layering Deepseek into their systems.
What’s missing? Grokthe conversational AI built by Elon Musk’s xAI and embedded in U.S. Teslas. China’s regulatory landscape has likely made it tough for Tesla to bring Grok across the border. Instead, it’s following a playbook similar to BMW, which recently tapped Alibaba’s QWen to power voice functions in its China-focused lineup. It’s part of a broader trend: foreign carmakers leaning into local AI to meet the expectations of a hyper-digitized consumer base in the world’s most advanced EV market.
But under the surface, there’s another story unfolding. Shipments from Tesla’s Shanghai plant have declined in six of the first seven months this year, with July deliveries down 8.4% from a year ago. The company hasn’t confirmed whether the new AI features are live in vehicles yet, and several owners told Bloomberg they haven’t seen updates. With the last official over-the-air update logged on August 18, investors are left wondering whether this AI pivot is a defensive moveor the beginning of Tesla’s next chapter in China.