Tesla is still battling spying suspicions in China

By Michelle Toh, CNN Business

Tesla cars are being kept off some roads in China as authorities bar them from sensitive areas, reportedly including a seaside resort town where a top leadership gathering could take place next month.

The reports suggest that the automaker continues to face deep mistrust from officials about whether its vehicles could be used for spying, despite repeated personal assurances from CEO Elon Musk.

Reuters reported Monday that Tesla cars would be barred from entering Beidaihe, a beach resort near Beijing, for at least two months starting in July, citing an unidentified local traffic police official. The town traditionally hosts the annual summer gathering of the country’s most powerful politicians, though dates for the summit are not typically publicly disclosed.

Tesla drivers were also stopped from using certain roads in Chengdu earlier this month when President Xi Jinping was visiting the metropolis in southwestern China, according to Reuters.

Authorities in Qinhuangdao, which administers Beidaihe, and Chengdu did not immediately respond to queries from CNN Business, while Tesla did not respond to a request for comment.

Tu Le, founder of Beijing-based consulting firm Sino Auto Insights, said that he had heard from Tesla owners who live in Beidaihe, or frequently visit the resort, that they may not be able to drive their vehicles there soon.

Recently, Chinese government officials have been leery of the data collected by Tesla’s onboard cameras.

Since last year, some Chinese government ministries have barred Teslas from entering their office compounds in Beijing, a source who regularly visits these agencies for business meetings with officials told CNN. The source asked not to be named due to the sensitivity of the subject.

Similarly, the Chinese military reportedly banned Tesla vehicles from entering its complexes in 2021 over fears about potential leaks of sensitive information.

Le said that the reports about the latest restrictions weren’t particularly surprising, given those concerns.

“To me, this is just a continuation of current policy,” he told CNN Business.

Tesla has addressed the concerns directly, pledging to keep any data it collects from locally sold cars within China’s borders.

Last May, the company announced a new data center in mainland China as well as plans to “add more” in the country in the future.

Musk has also sought to personally reassure the Chinese government, meeting officials and rolling out a charm offensive in local media.

“There’s a very strong incentive for us to be very confidential with any information,” the world’s richest man said last March at a conference organized by a unit of the government.

“If Tesla used cars to spy in China or anywhere, we will get shut down,” he added.

Those assurances, however, don’t seem to have done enough.

“It’s a very sensitive time,” Le noted. “So I think every precaution is being taken.”

China’s ruling Communist Party is currently gearing up for a key meeting in the fall, where Xi is expected to formally assume a historic third term. That comes as the country’s leadership continues to face mounting tensions with the United States over issues including Russia’s war in Ukraine, as well as heightened criticism of its unwavering “zero Covid” policy.

China is critical

Musk, who is known for being particularly outspoken on Twitter, has stayed noticeably silent despite the headlines of potential curbs on his company in China, noted Le.

“If this was any other country, Elon would throw a fit,” he said. “His silence speaks volumes to me.”

China is crucial to Tesla. It serves as a huge production base for the automaker, and made up a quarter of its revenue last year, a proportion that Musk expects to swell. Last year, the CEO predicted that the country would ultimately become its “biggest market.”

However, Tesla has faced a series of headwinds in China this year, mostly due to a stringent, two-month lockdown in Shanghai. The company’s Gigafactory in the city was shut down for several weeks, while its sales in the country in April nearly flatlined as more people stayed home.

Musk’s critics also worry that his Tesla interests in China could ultimately be used as leverage over other parts of his sprawling empire, including his space exploration ventures, and potentially Twitter if his takeover of the platform is completed.

Some academics have expressed concerns, for instance, that the businessman could be pressured to tamp down on criticism of China around the world — should he become the social media network’s new owner — in exchange for maintaining Tesla’s position in the world’s biggest auto market.

Musk has also assisted the Ukrainian military with his Starlink internet satellite system, which has aroused suspicion in Chinese state media. Some users on Chinese social media have questioned where the CEO’s political loyalty lies.

“Any leverage points will try to be exploited,” said Le.

In recent years, Musk has also outlined an ambitious goal of producing 20 million vehicles by 2030.

But “his goals for world domination, they don’t come to fruition without China playing a big part,” said Le. “Not only from the demand standpoint … but from access to market, manufacturing, [and continued] friendly policies toward Tesla.”

— CNN’s Beijing bureau, Steven Jiang and Laura He contributed to this report.

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