Recently, Tesla was included in the government procurement list by the Jiangsu Provincial Government of the Chinese Communist Party, shedding the label of “potential risk” associated with its data. Tesla’s Full Self-Driving (FSD) technology is also poised to enter China. Experts believe that the reason behind the special treatment given to Tesla by the Chinese Communist Party may be to acquire Tesla’s battery control technology to address the flammability issues in China’s electric vehicles.
The Jiangsu Provincial Government procurement website recently published the “Jiangsu Province Party and Government Agencies, Institutions, and Group Organizations 2024-2025 New Energy Vehicle Frame Agreement Procurement Shortlist (3)”. The details revealed that among the 56 car companies shortlisted, Tesla (Shanghai) Co., Ltd.’s Tesla Model Y rear-wheel-drive version stood out, being the only foreign-funded electric vehicle brand on the list.
The Jiangsu Provincial Procurement Center stated that government procurement does not involve the purchase of imported goods, and Tesla is considered domestically produced, not imported. The designation of Tesla as a “domestic car” has puzzled and surprised Chinese netizens since Tesla was previously labeled by the Chinese Communist Party as having “potential risks,” prohibiting its entry into sensitive areas.
The decision by Jiangsu Province signifies that Tesla has passed the Chinese Communist Party’s scrutiny regarding the security of its electric vehicle data and is believed to indicate a closer relationship between Elon Musk’s company and the Chinese government.
In Shanghai, several state-owned Chinese enterprises have already purchased a batch of Tesla electric vehicles Model Y for official use. In the first week of July, Tesla’s stock price had surged by 25.88%, with a market value increase of $163.21 billion.
Chinese-American economist David Huang, speaking to Epoch Times, stated that the Chinese government procuring Tesla holds greater symbolic meaning, signaling that “the government is no longer suppressing Tesla.”
Since entering China, Tesla has faced many obstacles. Due to the numerous cameras installed in Tesla vehicles, the Chinese Communist Party has been closely monitoring the data collected. Reports circulating on Chinese internet platforms have speculated about data vulnerabilities in Tesla vehicles, leading some sensitive Chinese departments to erect signs prohibiting Tesla from entering “restricted access areas.”
The restrictions imposed by Chinese authorities and negative information circulating online about Tesla and data collection not only impacted Tesla’s sales in China but also caused inconvenience to Tesla owners. The rapid mass production of electric vehicles in China has further narrowed Tesla’s market space.
Huang pointed out that when the Chinese Communist Party has an agenda with a foreign company, they first set up inexplicable limitations to create conditions. Then, when negotiating with the foreign company, the Chinese authorities may request certain conditions such as “Tesla’s data must stay within the country and possibly share some technology.” Previously, Tesla had shared core electric vehicle technology, aiding in the rapid development of electric vehicles in China.
Before the APEC summit in San Francisco in November 2023, Chinese leader Xi Jinping met with top executives from SpaceX and Tesla, expressing support for Tesla’s development in China.
Musk responded by stating that Tesla had been in the Chinese market for 10 years, reaffirming the commitment to continue deepening cooperation in China and looking forward to mutual development in new energy vehicles, energy storage, and artificial intelligence (AI).
Earlier this year, SpaceX suspended its satellite service in Taiwan, prompting questions from U.S. congressional members.
On April 28, at the invitation of the China Council for the Promotion of International Trade, Musk made a sudden visit to China, engaging in discussions on further collaboration topics with the council president and meeting with Chinese Premier Li Keqiang.
Li Keqiang emphasized the indispensable role of foreign enterprises in China’s development, stating that the Chinese market would always be open to foreign enterprises, providing support to achieve mutual benefits and win-win outcomes. He praised Tesla as a successful example of Sino-U.S. trade cooperation. Musk expressed Tesla’s willingness to deepen cooperation with China and achieve more mutually beneficial results.
Musk’s visit to Beijing is seen as a potential breakthrough for Tesla’s advanced Full Self-Driving (FSD) technology within China.
Previously, the implementation of Tesla’s FSD technology in China faced significant obstacles, with Chinese regulatory authorities questioning whether Tesla had sufficient safeguards in place for the data collected and requiring access to high-resolution maps nationwide.
Tesla is believed to have obtained approval from Chinese regulatory authorities after meeting the conditions related to data security and reached a map and navigation agreement with Baidu.
Regarding Tesla’s data security concerns, on the day of Musk’s visit to Beijing, the China Association of Automobile Manufacturers issued a “Notification on the Inspection of Four Security Requirements for Automobile Data Handling (First Batch),” indicating that 76 models from six enterprises, including Tesla, met the four security requirements for automobile data handling, encompassing external face information, cabin data, and personal information.
In summary, Chinese regulatory authorities have determined that the data collected by Tesla domestically in China is secure and poses no risk of leakage.
Tesla is the first foreign car manufacturer confirmed by Chinese regulatory authorities to meet the standards, which is seen as a significant step in eliminating barriers for Tesla’s FSD technology in China.
It remains unclear whether Tesla was compelled to agree to certain measures or concessions to obtain approval. However, historically, the Chinese Communist Party has often required technology sharing, especially in core technologies, from foreign companies entering the Chinese market, which may include intellectual property rights.
Huang believes that the cost may involve “battery control technology.” Given the frequent incidents of electric vehicles catching fire in China, the Chinese authorities need to address the stability of batteries. Tesla’s advanced battery control technology appears to offer a viable solution.
Musk not only owns Tesla but is also the founder of SpaceX, Neuralink, and OpenAI, as well as the chairman of several other cutting-edge technology companies, leading in the fields of rocket transportation, Starlink technology, and artificial intelligence, among others.
U.S. policymakers are concerned that Musk’s deep involvement in China may pose security risks. SpaceX has secured sensitive contracts from the Pentagon and controls a significant portion of the global satellite internet through the Starlink network.
Since three years ago, China has been developing a so-called “national network” emulating Musk’s Starlink technology to compete with it. In 2022, Musk revealed that the Chinese government requested him not to introduce Starlink into China.
Experts indicate that while there is still a considerable technological gap between the U.S. and China in this area, the rapid development of China’s satellite manufacturing capabilities may accelerate the “national network” project, which cannot be ignored. Additionally, the sources of China’s related technologies are worth scrutinizing. Wang Xiaowen, an assistant researcher at the National Defense Institute of Taiwan, is concerned that China, historically known for “acquiring” technology from advanced countries such as the U.S., may not exclude the possibility of coercing Musk to “transfer” relevant technologies.
In response, Huang believes that Musk will not betray American technology and interests. NASA closely monitors Musk’s cooperation with China. Betraying one’s country can lead to imprisonment, as it constitutes a severe act of treason.
The strategic approach of the Chinese Communist Party towards foreign enterprises is summarized as “raising and slaughtering,” meaning initially offering favorable conditions and support, then entrapping the company through various means to obey the Chinese Communist Party’s directives. Once the utility value is exhausted, the company may face downfall. This pattern has been in practice for years.
In 2018, Tesla established itself as a wholly foreign-owned enterprise in Shanghai, receiving benefits such as free land acquisition and favorable tax rates. Li Qiang, then Secretary of the Shanghai Municipal Party Committee, gave Tesla special treatment, including providing low-interest loans.
Tesla’s Shanghai factory commenced operations in 2020, and compared to the domestic production in the U.S., Tesla reaped immense profits by leveraging cost-efficiency in production and labor. China’s inexpensive labor and supply chain enabled Tesla’s rapid expansion, with over half of its vehicles being produced at the Shanghai plant. As a result, Tesla’s reliance on the Shanghai factory has become irreplaceable.
Huang stated that the Chinese Communist Party is adept at creating binding interests. In recent China-EU trade frictions, the EU proposed raising tariffs on Chinese imported electric cars, particularly due to significant objections from German enterprises that have a considerable stake in China through their automotive companies. These companies did not wish to increase tariffs due to their interconnected interests. Presently, Tesla still holds substantial leverage over the Chinese Communist Party.