Why Tesla Stock Surged After CEO Elon Musk’s Visit to China

Tesla (TSLA) shares soared 15% Monday following reports that CEO Elon Musk's weekend trip to China brought a number of wins for the electric vehicle maker.

Tesla reportedly cleared key data privacy hurdles and won tentative approval to deploy Tesla's Full Self-Driving (FSD) system in China, Tesla's second-largest market behind the U.S.

The software is a source of revenue for Tesla in the U.S., with many users paying a monthly fee for it, and expanding it to China could boost the company's revenue and profit margins, which have taken hits in recent quarters.

"Musk winning FSD approval in the key China market is a watershed moment for the Tesla story in our view," Wedbush analysts wrote in a note Monday.

Tesla Expanding Partnership With Baidu

Tesla is also set to expand its partnership with Chinese tech giant Baidu (BIDU) to help with mapping and navigation for Tesla's operations in China. Partnering with a Chinese company could help ease the Chinese government's concerns about data security, but the issue of whether driver data could be sent to Tesla's U.S. headquarters to help train its autonomous driving technology may not be resolved yet, according to the Wall Street Journal.

Despite its name, Full Self-Driving doesn't make Tesla vehicles fully autonomous and requires driver attention. U.S. regulators have opened investigations into the software and its role in accidents involving Tesla vehicles.

Tesla has shifted its prices a number of times in the past few months, especially in China, where it faces rising competition from homegrown companies like BYD (BYDDY), XPeng (XPEV), and others.

Stock Has Surged Since Earnings Call Last Week

It's been a rough start to the year for the EV maker's stock, with shares tumbling amid disappointing delivery numbers and financial results, along with layoffs that began earlier this month.

The stock started to rebound last week as investors and analysts focused on Musk's comments in the company's first-quarter earnings call, including plans to focus on a more affordable model and autonomous taxis.

Tesla shares ended Monday's session at $194.05, a 15.3% increase over Friday's closing level. The stock has gained 37% over the past five trading sessions, but it's still down 22% since the start of the year.

UPDATE: This article has been updated throughout to reflect Tesla's closing share price on Monday.