Tesla has taken a further step towards launching self-driving cars in China after a row over the transfer of data from drivers in the world’s second largest economy.

Chief executive Elon Musk is understood to have reached an agreement with Baidu during a surprise visit to China.

The deal will allow Tesla to use the Chinese tech giant’s mapping licence for data collection on China’s public roads, which sources said was a key step for “full self-driving” to be introduced in the country, according to Reuters.

In a separate development, a top Chinese car association said on Sunday that Tesla’s Model 3 and Y cars were among models that it had tested and found to be compliant with China’s data security requirements.

At the moment Chinese laws forbid domestic data being transferred out of the country and full self-driving autopilot has not been enabled there.

Removing this barrier is seen as a vital step for Tesla, given China is the company’s second-biggest market, and that it is being outflanked by Chinese rivals that have already rolled out their own competitor softwares. 

Mr Musk on Sunday met with premier Li Qiang, China’s premier and second-most powerful politician.

It comes as car makers such as XPeng and Huawei Technologies have been seeking to gain an advantage over Tesla by rolling out similar self-driving software.

Data security and compliance have been key reasons why Tesla, which rolled out the most autonomous version of its Autopilot software four years ago, has yet to make it available in China, its second-largest market globally, despite customer demand.

Chinese regulators had since 2021 required Tesla to store all data collected by its Chinese fleet in Shanghai, leaving the company unable to transfer any back to the United States.

Tesla cars have for years been banned from entering Chinese military complexes over security concerns relating to cameras installed on its vehicles. 

Its cars have also been turned away from sites holding important political events, such as an annual summer leadership conclave the ruling Communist Party held in 2022.