Hong Kong (CNN Business)Tesla CEO Elon Musk says his company’s cars would never be used for spying in China, in response to reports that the country’s military has banned the vehicles over such concerns.
“There’s a very strong incentive for us to be very confidential with any information,” the billionaire said Saturday at the China Development Forum, an annual conference organized by a unit of the government’s State Council. “If Tesla used cars to spy in China or anywhere, we will get shut down.”
Additionally, The Wall Street Journal reported Friday that the government was restricting “military staff and employees of key state-owned companies” from driving the US automaker’s cars, “citing concerns that data the cars gather could be a source of national security leaks.”
The outlets cited anonymous sources. Tesla did not immediately respond Monday to requests for comment from CNN Business.
China’s Ministry of Foreign Affairs said in response to questions from CNN Business that it was not aware of the specifics of the Tesla case.
“But any enterprise operating and investing overseas must comply with the laws and regulations of the host country. As long as foreign enterprises come to China to operate and invest in accordance with the law and regulations, China takes a welcoming and open attitude and is dedicated to creating a better business environment for enterprises of all countries,” the ministry said.
Speaking via video call on Saturday, Musk compared the controversy to the one that troubled TikTok last year, a company he said didn’t receive “trust.” The ByteDance-owned app faced a potential ban in the United States last year on alleged national security grounds.
“The United States wanted to shut down TikTok. Luckily, it did not happen,” Musk said. “Many people were concerned about TikTok. But I think this kind of concern is unnecessary, and we should learn lessons from it.”
Tesla has made a big splash in China in recent years, particularly after it built its Shanghai Gigafactory. In 2019, the company began making cars there to bolster its presence in the world’s largest auto market, with Musk even calling the plant a “template for future growth.” The company managed to retain complete control of the project, which was unusual at the time. And it has enjoyed strong government support in recent years.
But the American carmaker has also attracted scrutiny from regulators recently, leading some observers to wonder whether its special relationship with officials is over. Last month, Tesla was summoned by Chinese officials to face questions about the quality of its Shanghai-made cars.
According to a report The South China Morning Post on Saturday that cited an anonymous source, the military ban was issued a “couple of weeks ago” because Chinese leaders had become “very concerned” about the company’s vehicles. The newspaper went on to add that Musk may visit China next month, citing the same source.
China is critical to Tesla’s global strategy, and “remains the linchpin” that justifies a higher stock price for Tesla in the coming years, according to Dan Ives, managing director of equity research at Wedbush Securities.
That’s why over the last few days, Wall Street has been “laser focused on any actions from Tesla [or] Musk in response to this poker move,” Ives wrote in a note to clients Sunday.
“We believe this statement … was important for Tesla and Musk to make directly to the Chinese and the government in Beijing given the strategic importance of its [electric vehicle] ambitions within China,” he added.
“With a brewing Cold Tech War between the US and China” he said that Tesla and others “remain caught in the crossfire and ultimately Musk needed to draw a clear line in the sand.”
— Shanshan Wang and Shawn Deng contributed to this report.