Officials in China are reportedly concerned that tech in Tesla’s cars could be used for espionage with data sent to the US.
Elon Musk had a busy weekend shoring up Tesla’s future in China by publicly denying allegations that its cars could be used for spying.
On Friday (19 March), the Wall Street Journal reported that the Chinese government was restricting the use of Tesla vehicles by military staff and some state-owned companies. According to the report, Chinese officials are concerned that the bevvy of technology in a Tesla car could be used for spying and collecting data.
They reportedly believe that cameras on the vehicle could gather images of the car’s locations and who is using it, and information from mobile phones synched up to the vehicle could be siphoned – with all of this info potentially being transferred to the US.
The report marks another chapter in the tech tiff between the US and China. Disputes over Huawei and TikTok, with allegations of espionage and links to the Chinese government, arose under Donald Trump’s administration. In the case of Tesla, accusations are now being levelled back at a US company.
The situation also emerged days after a tense summit in Alaska between US and Chinese officials that did little to improve relations between the two sides. During the talks, China accused the US of inciting attacks by other countries against China while the US accused Beijing of “grandstanding”.
It was amid this backdrop on Saturday that Musk denied the allegations against Tesla while speaking at a virtual event hosted by China’s State Council.
“There’s a very strong incentive for us to be very confidential with any information,” he said. “If Tesla used cars to spy in China or anywhere, we will get shut down.”
Musk went on to reference the US-China spat over TikTok, which he derided as unnecessary.
“The United States wanted to shut down TikTok. Luckily, it did not happen,” he said. “Many people were concerned about TikTok. But I think this kind of concern is unnecessary, and we should learn lessons from it.”
China is an increasingly vital market for Tesla and it has built a large factory in Shanghai. The facility has capacity to manufacture more than 5,000 of its Model 3 cars a week and it recently started making its Model Y cars there. Tesla sold more than 147,000 cars in China last year, accounting for 30pc of total sales.
The significant investment in China had initially endeared Tesla to decision makers in Beijing, in a market notoriously difficult for Western companies to get a large foothold in.
Any security scrutiny from the Chinese government could hamper the company’s gains in the country and stymie expansion if it gets caught up in the US-China tit-for-tat. Tesla stock saw a dip when the reports first emerged but it has since recovered.
Musk’s comments on Saturday were a speedy response to downplay any tensions Tesla may face. It is also telling that Musk briskly followed up on the allegations at a Chinese government-organised event rather than firing out a spicy tweet, as is often his wont.
Tesla’s ambitions in China must also contend with intensifying competition from domestic rivals. Geely, the Chinese multinational that owns Volvo, is rolling out more and more electric vehicle models.
Nio, another Chinese competitor, saw an uptick in its share price over the weekend while Tesla endured its dip.
US-China tensions show no immediate signs of tempering under the Biden administration, but last week a judge in the US temporarily blocked the Department of Defense in its bid to blacklist Chinese smartphone maker Xiaomi.