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US-China tensions

China bans use of Tesla by military, citing security concerns

Crackdown comes at a time of rising tensions between Beijing and Washington

Tesla vehicles are parked outside of a building at the Zhongnanhai leadership compound in Beijing during a meeting between Tesla CEO Elon Musk and Chinese Premier Li Keqiang in January 2019.   © Reuters

BEIJING -- The Chinese military has in effect banned the use of Tesla vehicles by its staff and employees, citing concerns that data collection by cameras installed on the cars can lead to leaks of sensitive information, sources said Friday.

The move comes at a time when tensions between Beijing and Washington are running high. China's top diplomats and their U.S. counterparts just had a heated exchange in their first meeting in Anchorage, Alaska, raising speculation that Beijing is pressuring Washington by going after the top U.S. electric vehicle maker. 

Tesla cars are now prohibited from entering People's Liberation Army facilities and housing complexes, the sources said. The government is concerned that the omnidirectional cameras and ultrasound sensors on installed in the cars can lead to security leaks, according to the sources.

Chinese authorities, including the State Administration for Market Regulation, said it investigated two Tesla subsidiaries in February. In addition to safety issues, such as rapid acceleration and battery fires, the authorities asked the Tesla side about the suspicion that the automaker is taking user data out of the country. 

Chinese regulations mandate so-called new-energy vehicles, including electric and plug-in hybrid cars, to offer real-time driving data, such as vehicle location and battery usage, to authorities. Suspicion has been raised that Tesla has not followed this requirement. 

According to The Wall Street Journal, Beijing is also banning employees of government agencies from using Tesla cars. 

"If Tesla is not following Chinese rules and regulations, the restriction is appropriate," said a Chinese local government official.

Tesla sold 145,000 vehicles in China last year, according to British research firm LMC Automotive. This roughly threefold jump from 2019 vaulted the company to third place in new-energy vehicles, behind Chinese automakers SAIC Motor and BYD.

Demand grew among affluent consumers unable to spend money on foreign travel, as well as middle-class shoppers seeing locally produced Teslas as a relative bargain.

China generated about 30% of Tesla's global sales volume last year and was a major driver behind the company's first-ever annual net profit.

The Chinese government, keen to win over a prominent American business, has rolled out the red carpet for Tesla, allowing it to become the first foreign automaker to set up a wholly owned production and sales subsidiary in the country.

But friction between Washington and Beijing could create a bumpier road ahead, and Thursday's openly confrontational meeting between U.S. Secretary of State Antony Blinken and China's top diplomat, Politburo member Yang Jiechi, does not bode well on that front. 

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