On Monday, the Wall Street Journal reported that Tesla (NASDAQ:) has received preliminary approval from Chinese regulators to introduce its advanced driver assistance software, known as Full Self-Driving (FSD), in China.

This approval came following an unexpected visit by CEO Elon Musk to Tesla's biggest market outside of the United States.

TSLA stock surged over 15% on Monday.

According to the report, Tesla will utilize mapping and navigation technology from Baidu (NASDAQ:), a leading Chinese technology firm, to implement its FSD solution in the country.

“Tesla has historically focused its FSD R&D on North America. While we believe a lot of the engineering that Tesla has done would be applicable globally, we believe the company would need local enhancements for the product,” analysts at Goldman Sachs said in a note.

“Importantly, Tesla will also need to navigate government rules on data access, localization, and AI which could complicate technology sharing within/outside of China,” they added.

Analysts at Goldman Sachs also believe that the speed and extent of Tesla's improvements to its FSD product will be crucial in determining its impact on the company’s business in China. This includes direct sales of FSD, its role in boosting auto sales, and the potential for licensing.

They note that while FSD is not yet a fully unsupervised product, Tesla’s application of end-to-end neural networks “could allow it to develop the product faster than our base case view.”

Analysts at Wells Fargo, on the other hand, shared more cautious remarks on the FSD update. They believe the “timing is poor” for the EV giant “as the company's more aggressive FSD push & robotaxi will likely only increase the concerns of regulators.”

Last week, it was reported that the National Highway Traffic Safety Administration (NHTSA) is probing Tesla’s December 2023 recall of over 2 million vehicles concerning autopilot updates after 20 crashes with the new software.

Meanwhile, analysts at Citi think that the tentative FSD approval in China is a positive development for the automaker, as it could improve the company’s competitive position in the world’s largest auto market.

“Given recent pressures Tesla has faced in China, this is a welcomed development,” analysts wrote.

“That said, the impact on future demand is debatable given the number of competing L2+ systems that already exist in China (unclear how FSD will benchmark against those) and it remains unclear when FSD can actually deploy given the reported conditions that must be met,” they added.