Tesla Facing New Data Security Challenges in China

by | Aug 28, 2023

One of Tesla’s main selling points is its automated driving features, supported by a ring of cameras that provide 360-degree recording outside of the vehicle. This has been key in making the company the world’s biggest electric vehicle manufacturer, and the third-biggest in China. But while the Chinese government has largely welcomed Tesla’s business, it has also repeatedly expressed concerns about the data security implications of its vehicles.

This has manifested in sporadic bans of Teslas from various areas, mostly those associated with the military or government offices. But this has recently expanded to certain sporting events and airport parking, which seems to have prompted Tesla to engage in some PR to reassure China that its cars are not being used as spy tools.

Tesla offers data security reassurance as restrictions mount

China has passed an assortment of laws in roughly the past two years that make data security issues much more challenging for foreign firms that opt to do business there. There are much tighter restrictions on passing domestic data outside of the country, and the government now requires access to anything that a company keeps inside of the country.

This has forced a major reassessments on the part of numerous foreign firms with a China market presence, and the answer many are coming up with is to simply split off a China-only wing of their operations that is run more or less independently. This is something that Tesla has been doing for some years now, having already established a local data center. But self-driving features have been delayed in the country due to the new data security regulations making it difficult for Tesla to send information to and from the servers that host its AI algorithms, and it is unlikely the company will place those algorithms in China for fear of compromise.

Tesla’s data security issues in China are unique. In other countries, specifically in the EU, it has been challenged for potentially violating privacy law. In China, the government is concerned about its ability to film sensitive areas. The company took to Weibo to address this specific concern, pointing out that the video that its vehicles record in China stays at its data center within the country and that recording must be initiated by the driver of the vehicle.

Tesla’s future continues to look bright in China despite government restrictions

Tesla is a standout in China’s EV market. While there are domestic companies that are currently outperforming it, it is the only foreign company yet to manage to become a significant player there. The company has also made a long-term commitment to the country, with not just a data center but one of its manufacturing Gigafactories within its borders.

One of the costs of doing business appears to be sporadic bans from parking areas and major events, however. This started a little over two years ago with the government restricting Tesla vehicles from certain military and government facilities. Some housing complexes for government workers and members of the military have also since banned Teslas from their lots over data security concerns.

As Tesla points out in its Weibo post, the “Sentry Mode” that is the central source of concern is off by default. That is a fairly recent change, however, and one that the company was essentially pushed into by the revelation that employees had been inappropriately sharing customer car videos through the office for years.

Tesla is projected to continue growing in China, but its challenges there are indicative of what all types of foreign firms can expect going forward. Those that are not prepared to make their strategies work with siloed data and proprietary AI/algorithms working from elsewhere in the world may need to follow the likes of Morgan Stanley and Amazon, pulling some (or all) operations and personnel out of the country entirely.

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