Just like America did with Huawei. China bans Tesla cars from military compounds for security reasons

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Sources told Reuters that the Chinese military has prevented Tesla cars from entering its residential complexes, citing security concerns about cameras installed on vehicles, while Tesla’s president, Elon Musk, denied the information while attending a conference in China.

The move is the latest sign of Beijing’s growing scrutiny of the U.S. electric car maker amid tensions with Washington, which analysts say is very similar to U.S. actions against Chinese telecommunications company Huawei for national security reasons.

Tesla had strong support from Shanghai when it built its first factory there in 2019, its first overseas, and the stylish Model 3 sedan was the country’s best-selling electric car, before being overtaken by a much cheaper electric car last year.

The two sources said that this prompted Tesla owners to park their cars outside military property, and residents were notified of the measures this week.

Pavel Molchanov, an analyst at Raymond James & Associates, said the recent restrictions on Tesla are very similar to the U.S. government’s hostility toward Huawei because of concerns about Beijing’s access to U.S. communications infrastructure.

« Even if this concern is exaggerated, it could directly harm these companies, » he said.

The Wall Street Journal reported that the Chinese government was restricting the use of Tesla cars by individuals in state-owned military companies in sensitive industries and key agencies.

It was not immediately clear whether the procedure applied to all such facilities. The move followed a government security review of Tesla’s vehicles, the Wall Street Journal reported, citing people familiar with the effort.

Tesla shares, which have more than 8 times in 2020, fell nearly 2% in early trading in New York on Friday following the news.

Tesla sold 147,445 cars in China last year, although it faces increasing competition from local competitors such as Nio and Geely.

Tesla

Cars and cameras

The military’s apparent concerns about Tesla underscore a broader problem for automakers, as they provide more vehicles with cameras and sensors that take pictures of the vehicle’s perimeter.

The biggest challenge for the automotive industry and regulators around the world is who controls the use of these images and where they are sent and stored.

Tesla cars have several external cameras to help with parking and self-driving, and CEO Elon Musk has often talked about the value of data captured by Tesla cars that can be used to develop self-driving.

The Tesla Model 3 and Y also have cameras in the rear view mirror of driver safety that are disabled by default.

The Chinese military’s restrictions on Tesla surfaced when senior Chinese and U.S. officials held a controversial meeting in Alaska, the first face-to-face interaction since U.S. President Joe Biden took office.

China has a range of tools — some directly and some indirect — to put pressure on foreign companies such as Tesla. According to Michael Dunn, CEO of China’s consulting firm ZoZo Go, « pressure can come from any direction, for any reason, at any time. »

It was not immediately clear whether Tesla’s decision was linked to rising tensions between the United States and China.

A Chinese government regulator said in February that government officials had met with representatives from Tesla about consumer reports on battery fires, unexpected acceleration and failure to update programs over the air.

Elon Musk

« We’ll close our company’s doors if we’re spying »

The news comes in conjunction with Tesla CEO Elon Musk’s online speech Saturday at an annual global economic gathering hosted by Beijing called the China Development Forum, which features Chinese officials.

Musk said at the forum that his company would be shut down if it used its spy cars, in his first comment on reports that the Chinese military had banned Tesla cars from entering its facilities.

« There is a very strong incentive for us to be top secret with any information, » Musk said during a hypothetical discussion, adding, « If Tesla uses cars to spy in China or elsewhere, we will close our doors. »

Source: Reuters + Wall Street Journal

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