Shares of Tesla (TSLA) dropped roughly 4% on Friday after high expectations surrounding US-China talks failed to deliver a major breakthrough for the company’s autonomous driving ambitions.
The stock fell to around $428.72 in early trading, interrupting a strong recent run that had seen Tesla rise for three consecutive weeks.
Coming into Friday’s session, Tesla shares were up roughly 3.5% for the week following a 9.6% gain the previous week.
The pullback came after meetings between US President Donald Trump and Chinese President Xi Jinping concluded without any major trade or investment announcements that could directly benefit Tesla.
Investors had hoped the summit — which included Chief Executive Elon Musk as part of the US delegation — might help accelerate regulatory approval for Tesla’s Full Self-Driving software in China.
Instead, the absence of any material agreements weighed on sentiment and halted some of the stock’s recent momentum.
The broader market also weakened on Friday, with investors taking profits in technology shares following a strong rally earlier in the week.
China FSD approval remains central focus
China remains one of Tesla’s most important markets globally and a crucial component of the company’s long-term artificial intelligence strategy.
Approval for Full Self-Driving in China would open a major new software revenue stream in the world’s largest electric vehicle market.
Tesla currently charges US customers $99 per month for FSD subscriptions.
In April, the company reported approximately 1.3 million FSD subscriptions at the end of the first quarter, up sharply from roughly 850,000 a year earlier.
Tesla generated more than 20% of its 2025 revenue from China, making regulatory approval there strategically important not only for vehicle sales but also for future software monetization.
Investor enthusiasm around Tesla increasingly revolves around its broader “physical AI” ambitions, including autonomous driving, robo-taxis, and humanoid robots such as Optimus.
The company currently operates robotaxi services in four US cities following its initial launch in Austin in June.
However, investors continue to press Tesla for faster expansion timelines and clearer evidence that these AI initiatives can generate large-scale revenue.
Australian lawsuit continues
Tesla also faced fresh legal scrutiny Friday during proceedings tied to an Australian class-action lawsuit involving roughly 10,000 drivers.
The lawsuit accuses Tesla of misleading consumers regarding phantom braking, battery range, and self-driving capabilities.
During a pre-trial hearing, Federal Court Judge Tom Thawley sharply questioned whether Tesla was taking the discovery process seriously after the company reportedly produced only 2,000 documents over an eight-month period.
Lawyers representing the plaintiffs argued that the materials provided were insufficient to brief technical experts involved in the case.
Justice Thawley described the limited disclosure as “gobsmacking” and warned Tesla it could face “a really bad time” if cooperation did not improve.
Tesla has denied misleading customers and maintains that it does not mischaracterize its products.
While the legal proceedings are unlikely to materially affect Tesla’s near-term financials, they add to broader scrutiny surrounding the company’s autonomous driving technology as regulators and courts globally increasingly examine AI-assisted driving systems.
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