China to ban Tesla use by military and government employees

Tesla, a growing company

Founded in 2003 by American entrepreneurs Martin Eberhard and Marc Tarpenning, Tesla is known worldwide for its electric cars, and especially its CEO since 2008, Elon Musk.
A car capable of driving itself, this what the company proclaimed it to become. This dream began in 2003 with the idea of a fully electric sport car that could go further than any of the electric cars on the market then. After gathering enough money, including the $30M from Elon Musk, Tesla finally created its first vehicle, the Roadster. The goal was reached, with 395km of range, more than any electric vehicle before. In order to charge the vehicle, Tesla created stations called Superchargers in the United States and Europe designed for charging batteries quickly and at no extra cost to Tesla owners.

Such a feat brought Tesla to work on a new model, the iconic Model S.

The vehicle came to the market in 2012, and in 2014 the famous Autopilot system was implemented to it. This semi autonomous driving is now available on every Tesla models, and makes the company fame. With time, Tesla diversified its range of vehicle with the Model X in 2015, a sport-utility vehicle, and in 2017 the Model 2017, a four-door sedan less costly. Lately, the company is extending even more its range of products with a SUV, the Model Y (2020), the Semi-Truck (2021), a semi-trailer, and the Cybertruck (2021), a light truck.

Along with this vehicle business, Tesla bought what is now its subsidiary, SolarCity. The company develops installs solar photovoltaic systems in the United States, giving Tesla.inc a “green energy dimension”, a new opportunities to improve the current range of vehicles with maybe new ways of charging them.

Tesla in China, a land of opportunity

Meeting success in America and Europe, Tesla had to focus on Asia. Elon Musk decided to enter the most complicated market in this area, China. And he did. In 2018, Musk signed an agreement with Shanghai to set up its first factory in China. It is important to notify that China represents around 25 million vehicle sales per year. Lucky for Musk, the government is supporting the automobile area to grow and to welcome foreign companies. Furthermore, it is clear that having a factory right in China will lower the production costs, thus creating a competitive advantage for the brand. With that, the price of the Model 3 decreased, and people began to buy Tesla products.

In addition, the market of electric vehicle in China is growing exponentially. As a matter of a fact, a greener economy is quite the center of attention for the country and its population. It truly is a great opportunity for Tesla to shine and bring the products expected by China.

Privacy issues between Tesla and Chinese government

What happened for such a controversy to take place ? The matter, very common for China, is privacy. In summary, Tesla cars have been banned from military bases, and both military and state employees are prohibited to own a Tesla. Chinese government invokes a violation of national security, as the vehicles could leak highly classified information. Such a measure is one of many side-effects due to the ongoing Trade War between the US and China. Since the Huawei case has been stated, privacy is now an important matter for both countries.

Moreover, Bloomberg journal stated that the company could be banned in entier regions of China. The fear of the cars collecting sensitive data via the cars’ in-built cameras seems quite persistent, for a country which knows its subject in matter of cameras. Actually, it is quite interesting to see that China is compliant to let Tesla do business within the country but with wide restrictions. The point to make here is why China would let the American company be at ease with flourishing cities like Shanghai, while restricting it ? The car will still be able to film anywhere around it. It doesn’t cut out the technology embedded in the vehicle.

The thing to retain of it is how Chinese government is able to regulate the market, opened to foreigners but also strict about competitive abuses. Is it censorship to favor the local production, instead of letting external company take over the market ? It could be, or it could be necessary protectionism. It is quite a debatable subject, since local companies represent the identity of a country. Although, in order to expand, some would prefer to open business frontiers and make use of each other’s knowledge.

But for now, let’s see how Elon Musk will handle the lost bullets from the Trump Administration policy towards China.

References

Cimino V., March 20th, 2021, “Chine : militaires et fonctionnaires ne peuvent pas acheter de Tesla“, siecledigital.fr

Liu J., Zhang C., Li J., March 19th, 2021, “Tesla Cars Banned by China Military on Concerns Over Cameras“, bloomberg.com

Madhok A., July 14th, 2020, “Tesla’s Chinese Foray: Why, What and How“, counterpointresearch.com

Schreiber B., Gregersen E., July 14th, 2020, “Tesla, Inc.“, britannica.com

Zhai K., Kubota Y., March 19th, 2021, “China to Restrict Tesla Use by Military and State Employees“, wsj.com