The Chinese government is wary of Tesla

A recent Reuters report said that starting 1 July, Tesla cars will be prohibited from entering China's coastal district of Beidaihe in Hebei province's Qinhuangdao for at least two months. The local traffic police official cited the reason as "national affairs".

Speculation ensued that the Chinese Communist Party (CCP) leaders' Beidaihe summer retreat - usually kept under wraps - will take place during this period.

Associate Professor Victor Shih from the School of Global Policy and Strategy at the University of California, San Diego, tweeted: "Well I guess that's when the Beidaihe meeting will take place and I guess the Chinese government doesn't trust Tesla."

Beidaihe is a beach resort located 257 kilometres east of Beijing. Former and current Chinese leaders usually head to Beidaihe for a summer break. In that informal setting, they would exchange views on major national policies and key appointments. This year's retreat will be even more closely watched as it precedes the all-important CCP's autumn 20th Party Congress which decides on major appointment changes and power reshuffles.

This is not the first time the Chinese government has imposed a ban on Tesla vehicles in a certain precinct.

A few weeks ago, Chinese netizens noticed that the Chengdu police were diverting Tesla cars away from Shudu Avenue and First Ring Road. A screenshot from a WeChat chat group of Tesla car owners in Chengdu (特斯拉成都车友会) read: "The traffic police said that the diversion is not aimed at drivers like me but Tesla instead. Other cars can drive through First Ring Road but not Tesla cars."

This happened when Chinese President Xi Jinping visited Yongfeng village in the Dongpo district of Meishan city, Sichuan province on 8 June. Meishan is located just about 60 kilometres southwest of Chengdu. On 9 June, Xi met with senior military officers and cadres stationed in Chengdu.

Earlier on 21 May 2021, Reuters and Bloomberg reported that some Chinese government staff had been told not to park their Tesla cars within government compounds due to security concerns over cameras installed on the vehicles. The Zhejiang and Guangxi authorities had also instructed government bodies to sift out employees who owned Tesla cars and to forbid staff of key agencies from driving their Tesla cars into certain official areas. A person familiar with the matter also said that China Meteorological Administration staff have been banned from buying Tesla cars. If they already owned a Tesla car, they would need to transfer the vehicle ownership to another person.

In March this year, Tesla cars were also banned from some military complexes due to concerns of data being collected by the cameras built into the vehicles. During that time, the high-level China-US meeting in Alaska was in progress.

On 22 March, people familiar with the matter told The Wall Street Journal that the findings of the Chinese government's security assessment of Tesla vehicles raised concerns because the cameras installed in the cars are able to record images continuously and obtain data on how, when and where the vehicles are used as well as the contact lists of the mobile numbers linked to the cars. Beijing's fear is that some of that data could be sent back to the US.

The autopilot features and full self-driving capabilities of Tesla cars are the pride of Tesla. The system behind it relies on the car's cameras and sensors to capture information in the external environment. It then analyses and processes the data via computer vision technologies and algorithms to make decisions about decelerating the vehicle to avoid obstacles.

Tesla Artificial Intelligence (AI) director Andrej Karpathy shared in 2021 on Tesla AI Day that each Tesla car is equipped with eight surround cameras that give 360-degree visibility of traffic lights, signal signs, ramps, curbs and other information, thereby providing excellent conditions for neural network learning.

Karpathy said that Tesla was essentially hoping to "build an animal from the ground up", which has "all of the mechanical components of the body, the nervous system, which has all the electrical components, and for our purposes, the brain of the autopilot, and specifically for this section the synthetic visual cortex".

Based on information obtained from its eight cameras, Tesla cars are able to call up a 3D bird's eye view of the road network in real time with 4D spatial and temporal information to help the vehicle get a good sense of its driving environment.

That is to say, Tesla's cameras are like the human eye, just that this pair of "eyes" has a wide 360-degree view of its surroundings with no blind spots.

While Tesla has said that it would never use the data collected for spying, its powerful autonomous driving system is still of great concern to the Chinese government.

Compared to other foreign enterprises, Tesla is treated very well in China. Since the 1990s, China has prohibited foreign automakers from setting up wholly-owned subsidiaries in China and stipulated that foreign enterprises must be joint ventures with Chinese enterprises. But Tesla was able to build a mega factory in Shanghai in 2018 and was even granted concessions to become the first wholly foreign-owned car plant in China. Within a year, it delivered its first China-made vehicles.

Despite its close relationship with the Chinese government, Tesla still faces various impediments.

Over the past two months, Shanghai imposed a two-month Covid lockdown which forced Tesla's Shanghai plant to shut down for 22 days. This dealt a big blow to its production capacity, and its second-quarter production is likely to fall by a third compared with the previous quarter.

Tesla is currently trying to recover from a significant decrease in production precipitated by China's strict anti-Covid policies and ongoing supply chain issues. Tesla CEO Elon Musk said in an interview published on 22 June that the past two years "have been an absolute nightmare of supply chain interruptions, one thing after another, and we're not out of it yet", adding that Tesla's chief concern was keeping factories operating so that they could pay people and not go bankrupt.

Tesla's public relations crisis in China is akin to Huawei's plight in the US - China and the US are both wary of each other's tech giants in their respective countries. Even Tesla, which enjoys special treatment from the Chinese government, can be singled out and cast in doubt when it concerns key national security issues. This is a microcosm of the business environment for foreign companies in China, and also a reflection of intensifying China-US tensions.

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