Tesla CEO Elon Musk faces a tough challenge in the China market which threatens to derail the remarkable progress that the American EV maker has made in the Asian market so far.
- Tesla’s surge powered by the China market suffered a massive setback as the country banned use of its cars by Chinese officials.
- Elon Musk has come out all guns blazing, emphatically stating that Tesla would have to shut if its cars are ever used for spying operations, in China or any other country.
- The timing of the China ban is significant, coinciding with the explosive security dialogue between the US and China.
- Musk is being forced by the Chinese government to modify Tesla’s new navigation technology.
- The hurdles for Tesla in its fastest growing market also benefits Chinese EV companies SAIC Motors and Xpeng (XPEV).
According to CEO Elon Musk, American electric automaker Tesla would shut shop if its cars were used to spy on China or any other country. During a discussion while speaking at the Chinese Development Forum, Musk stated, “There’s a very strong incentive for us to be very confidential with any information… If Tesla used cars to spy in China or anywhere, we will get shut down.”
Musk was responding to the move by Chinese authorities to ban the use of Tesla by state and military officials. According to the Wall Street Journal report, the reason behind this suspicion is Tesla’s revolutionary “Autopilot Navigation” technology. The iconic automotive technology requires cameras and sensors to capture images of surroundings for the feature to function. This feature has instilled fear among Chinese officials about alleged collection of key geographical data of the country, when and where the vehicles are used.
Watch: Musk denies the claim that Tesla cars are used for spying
In addition to this, top Chinese officials are also concerned about the fact that their smartphone’s contact list can also be collected by the company if the users integrate the information into their Tesla car. The sudden and abrupt ban on Tesla by the Chinese authorities hit the Tesla stock hard. The Tesla share price dropped as much as 4.4 percent on Friday, closing finally at a 0.26 percent decline.
Strategic Timing of the Tesla ban in China
But what’s more interesting than the ban on the EV mogul is the timing of the ban. Top diplomats from China and the U.S. were amid a significant meeting in Alaska when the news broke out. Musk, an outspoken CEO, tackles volatile matters with an iron fist. However, after Chinese officials circulated the notice, Musk requested the two global superpowers to build mutual trust in his remarks at China Development Forum. The State Council had organized this discussion panel at the Forum . Xue Qikun, a Chinese physicist and Head of Southern University of Science and Technology hosted the panel involving Elon Musk.
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Why China matters to Tesla
Tesla has had a progressive business graph, particularly in China, in the past few years. In fact, in 2020 the American electric vehicle company doubled the sales numbers from 2019 at $6.66 billion in China. These overall sales in China last year accounted for 21% of Tesla’s total sales that stood at $31.54 billion.
However, Tesla is now facing stiff competition in the market, especially due to the technological preferences of the Chinese authorities. The Navigate on Autopilot feature of Tesla works by collecting the image of the surrounding location through both cameras and sensors. However, the security authorities of the Asian superpower press on the usage of lidar technology. Lidar uses light ranging and detection sensors for autopilot features. Elon Musk, however, has rejected the thought of inculcating lidar in the Tesla’s manufacturing. He has reasoned that the method is much more expensive and also unnecessary.
With the ban, Tesla not only faces animosity of officials but also competition from China’s domestic automakers SAIC and Xpeng. Furthermore, these companies are devising plans to use lidar sensors and software for the automated driving features.