Tesla’s testing and deployment of its Full Self-Driving technology in China has become a regulatory quagmire for the company. While China’s vast market and apparent government cooperation may appear tempting, Tesla’s entanglement with the bureaucratic machinery of state capitalism has only reinforced what should be obvious: the more transparent, stable and innovation-friendly regulatory environment at home in the United States continues to set America apart from its authoritarian competition.
No state does it better than Arizona. As a new report from the Goldwater Institute — where I serve as president — makes clear, Phoenix has become the national proving ground for autonomous vehicle deployment, thanks to its clarity of rules and forward-leaning infrastructure.
Tesla’s initial greenlight to test full self-driving in China appeared to be a breakthrough — an entry into a massive, data-rich EV market. But the illusion of regulatory alignment with Beijing quickly ran into the wall of authoritarian oversight. In March, Chinese authorities halted Tesla’s trials under a sweeping new mandate requiring automakers to submit detailed technical information before issuing over-the-air software updates.
The effect was swift. Tesla and domestic rival Xpeng were both forced to delay rollouts. It was a stark reminder that in China, the pace of innovation is ultimately subject to the whims of government bureaucrats or strategic priorities of the Chinese Communist Party.
Worse still, Tesla’s reliance on Chinese infrastructure threatened its proprietary edge. Data collected on Chinese roads — assuming it can leave the country at all — would be subject to government scrutiny or appropriation. In contrast, Phoenix offers a framework anchored in stability and transparency, enabling autonomous vehicle companies to test and tinker without the looming risk of regulatory sabotage.
Arizona has emerged as a leader by embracing a freedom-oriented approach to regulation. Since 2015, the state has provided a regulatory framework that promotes experimentation while ensuring safety for the public. Former Gov. Doug Ducey’s executive orders and subsequent legislation created a regulatory environment where technology continues to flourish. Companies such as Waymo and Aurora have already made Phoenix a hub for driverless innovation, logging millions of miles in real-world conditions.
Unlike other areas burdened by excessive bureaucratic drag, Arizona champions permissionless innovation — allowing companies to develop, test and refine their technologies without unnecessary bureaucratic interference. This regulatory certainty should be essential for companies like Tesla, which typically needs flexibility and minimal red tape to iterate rapidly and improve its neural network.
Beyond regulation, Arizona provides ideal physical and logistical conditions for autonomous vehicle testing. Phoenix’s dry, predictable climate minimizes environmental variables, allowing for consistent data collection. Its sprawling suburban layout and infrastructure mirror the conditions where full self-driving is likely most effective in early iterations. The region’s extensive highways, diverse road types, and mixture of urban and suburban environments offer Tesla a comprehensive testing ground that better reflects the driving conditions of its core U.S. market.
Autonomous driving is not merely a convenience — it is a transformative, life-saving technology. By removing unpredictable human error, driverless vehicles could prevent tens of thousands of deaths each year. Data from Waymo’s operations in Phoenix reinforces this promise, demonstrating that driverless vehicles experience markedly fewer accidents than human drivers.
Engineering prowess alone won’t carry the industry forward, however. Long-term success depends on building public confidence through transparent, accountable testing. That trust is best cultivated in the United States, where states like Arizona enable companies to innovate without the looming threat of regulatory whiplash or local obstruction.
Tesla’s bet on China went bust, but the lessons run deeper: Innovation will not flourish when government prescribes methods and outcomes. In the geopolitical race for autonomous dominance, America’s advantage will never grow by mimicking state-run models. If the United States hopes to maintain its global leadership in autonomous vehicle technology, it must safeguard a freedom-first model of innovation — one rooted in private property, constitutional order and consistent safety standards. The Arizona model, which pairs clarity with space for experimentation, offers a smart place to start.
Victor Riches is the president and CEO of the Goldwater Institute.
