What will China’s new data rules mean for Tesla?

It often happens that the implementation of a new technology leads to unforeseen problems in the social or political realms. Tesla’s vehicles can record both video and driving data, a capability that has foiled many miscreants over the years, from car thieves to lawsuit scammers to malicious auto reviewers. Antisocial types don’t like having their actions recorded, and it’s safe to assume that they aren’t fans of Tesla’s industry-leading data-collecting and connectivity features. 

Above: Tesla's Model Y (Twitter: Tesla Greater China)

However, it isn’t just freelance fraudsters that are camera-shy. Authoritarian governments are famously suspicious of documentation of all kinds, from reporters with notepads to online videos—unless they’re the ones doing the recording.

This could prove to be a problem in the world’s largest and most powerful authoritarian regime, a country that Tesla is counting on for a dragon’s share of its future growth. China recently enacted a set of new restrictions on how automakers store and use their ever-growing troves of data. Among other things, companies will now be required to store important data within the country. A new video from the Wall Street Journal looks at the risks for Tesla and other global brands.

Autocrats crave control, and China’s bosses surely want to keep their mitts on Tesla’s data for (at least) two reasons. First, the vehicles record a lot of valuable data—routes driven, performance, Autopilot usage—that Chinese automakers would probably like to have access to. Second, the vehicles’ cameras could theoretically be recording things that the powers-that-be don’t want recorded at all.

Back in April, in response to Chinese suspicions of spying, Tesla went so far as to say that the cameras in its cars are not activated outside of North America. “Even in the United States, car owners can freely choose whether to turn on [the camera system]. Tesla is equipped with a network security system with world-leading security levels to ensure user privacy protection,” a company spokesperson posted on a Chinese social media site.

“There’s a very strong incentive for us to be very confidential with any information,” said Elon Musk. “If Tesla used cars to spy in China or anywhere, we [would] get shut down.”

The new policy is already having practical effects on the company. In March, China banned Teslas from entering military facilities. The government has also reportedly restricted military personnel, and employees of certain state-owned companies, from driving Teslas.

Above: As China tightens its grip, Tesla and other global brands are now required to keep data within the country (YouTube: Wall Street Journal)

The details of the restrictions aren’t clear—does this mean that no one who works for the military is allowed to own, or even ride in, a Tesla? Samm Sacks, a Senior Fellow at Yale Law School and an expert on China’s cybersecurity policy, tells the WSJ that the past few months have brought “a regulatory storm,” and that foreign automakers will have to “walk this dance between Beijing and DC—a high-wire act navigating between pressure from Washington...as well as increased pressure from Beijing.”

Cybersuspicion runs in both directions—the US government has targeted Chinese firms such as Huawei and TikTok—and companies that handle large amounts of data are caught in the crossfire. These days, that definitely includes automakers, and especially Tesla.

Auto firms have had to take several steps to comply with the new rules, which went into effect October 1. Tesla says it has set up data centers in China to store all data generated by its cars. Sacks points out that this represents a loss of control. In the future, Tesla could have no choice but to share data with local authorities. The government can request access to any data considered “sensitive,” which includes, among many other things, information about traffic and EV charging stations.

Various “damned if you do, damned if you don’t” situations aren’t hard to imagine for Tesla and other foreign firms. They could be asked to turn over data that they consider proprietary, and threatened with dire consequences if they don’t comply. They could also be accused, fairly or not, of enabling unauthorized snooping. If they try to play it safe by disabling certain kinds of data collection, it could hobble some desirable features. Will Chinese drivers not be allowed to use handy features like Sentry Mode or dashcam footage?

Just complying with China’s data security rules could complicate Tesla’s development efforts. For example, as the WSJ points out, if all data collected in China has to stay in China, that could prevent Tesla from sharing valuable Autopilot usage information with R&D teams in other parts of the world. Having to develop Autopilot algorithms separately in different countries could add another layer of costs.

It’s understood that good relations with the government are the number-one requirement for business success in China. When Tesla announced the construction of Gigafactory Shanghai, the Middle Kingdom rolled out the red carpet, and it’s been full speed ahead ever since. For now, the relationship between the strange bedfellows—all-American libertarian disruptor and repressive Communist regime—is a mutually beneficial one. Tesla needs the sales that the world’s biggest EV growth market can provide, and China needs Tesla’s technology to help it seize a coveted seat at the top table of the global auto industry.

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Written by: Charles Morris; Source: Wall Street Journal