08:41 AM EDT, 04/29/2024 (MT Newswires) -- Tesla (TSLA) Chief Executive Elon Musk's latest visit to China and getting approval for its automated driving system is set to be a "watershed moment" for the electric vehicle giant's long-term growth, according to Wedbush Securities.

The automaker agreed to launch its full self-driving, or FSD, software service in China based on mapping and navigation functions provided by local technology firm and search engine Baidu ( BIDU ) , The Wall Street Journal reported Monday, citing people familiar with the matter. The financial terms weren't disclosed.

Working with a Chinese company will ease regulators' concerns about data security risks, while the FSD service will help Tesla to compete with local EV rivals that have already provided similar features, the sources told the Journal. Tesla and Baidu ( BIDU ) didn't immediately respond to requests for comment by MT Newswires

Tesla's shares climbed 13% in recent premarket activity, while Baidu's ( BIDU ) US-listed stock gained 5.4%.

The agreement with Baidu ( BIDU ) was key to receiving clearance from China for the driver assistance system, as Musk made his surprise visit to Beijing over the weekend, Wedbush Securities said in a client note. The Tesla chief reportedly met with a host of high ranking government officials, including Chinese Premier Li Qiang, to get the deal over the line.

"This is a key moment for Musk as well as Beijing at a time that Tesla has faced massive domestic EV competition in China along with softer demand," Wedbush analysts led by Daniel Ives wrote in the note. The EV maker's long-term valuation depends on the FSD service being available in China. Tesla has stored all data collected by its Chinese fleet in Shanghai since 2021, as required by local authorities.

Tesla will be able to accelerate training of its algorithms for its global autonomous technology, if the company is able to obtain Chinese approval to transfer data collected in the country abroad, according to the brokerage. Wedbush also expects Musk's trip to lead to a boost in the automaker's EV presence in China.

"While demand challenges exist in China for Tesla, the Street is looking through this painful transition period for the long term growth story to emerge for Musk (and company) with FSD a key ingredient in that recipe for success," Ives said. Wedbush maintained its outperform rating on Tesla's stock and the 12-month price target of $275.

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