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CNN Business

Tesla cars are kept off some roads in China as authorities ban them from sensitive areas, including a seaside seaside resort where a gathering of senior leaders could take place next month.

Reports suggest the automaker continues to face deep suspicion from officials about whether its vehicles could be used for espionage, despite CEO Elon Musk’s repeated personal assurances.

Reuters reported on Monday that Tesla (TSLA) cars would not be allowed to enter Beidaihe, a resort town near Beijing, for at least two months from July, citing an unidentified local traffic police official. The city traditionally hosts the annual summer gathering of the country’s most powerful politicians, though summit dates aren’t usually made public.

Tesla drivers were also barred from using certain roads in Chengdu earlier this month when President Xi Jinping visited the southwestern Chinese metropolis, according to Reuters.

Authorities in Qinhuangdao, which administers Beidaihe, and Chengdu did not immediately respond to questions from CNN Business, while Tesla did not respond to a request for comment.

Tu Le, founder of Beijing-based consultancy Sino Auto Insights, said he heard from Tesla owners who live in Beidaihe, or frequently visit the station, that they might not be able to get there. drive their vehicles soon.

Recently, Chinese government officials have become suspicious of the data collected by Tesla’s on-board cameras.

Since last year, some Chinese government departments have banned Teslas from entering their offices in Beijing, a source who regularly visits these agencies for business meetings with officials told CNN. The source asked not to be named due to the sensitivity of the subject.

Similarly, the Chinese military reportedly banned Tesla vehicles from entering its compounds in 2021 for fear of potential leaks of sensitive information.

Le said the news about the latest restrictions was not particularly surprising, given those concerns.

“To me, it’s just a continuation of the current policy,” he told CNN Business.

Tesla responded directly to the concerns, pledging to retain all data it collects on cars sold locally within Chinese borders.

Last May, the company announced a new data center in mainland China along with plans to “add more” in the country in the future.

Musk has also sought to personally reassure the Chinese government, meeting with officials and launching a charm offensive in local media.

“We have a very strong incentive to be very confidential with any information,” the world’s richest man said last March at a conference organized by a government unit.

“If Tesla uses cars to spy in China or anywhere else, we will be shut down,” he added.

These assurances, however, do not seem to have done enough.

“It’s a very sensitive time,” Le noted. “So I think every precaution is being taken.”

China’s ruling Communist Party is currently gearing up for a key meeting in the fall, where Xi is expected to officially assume a historic third term. It comes as the country’s leaders continue to face rising tensions with the United States over issues such as Russia’s war in Ukraine, as well as heightened criticism of its steadfast “zero Covid” policy.

Musk, who is known for being particularly outspoken on Twitter, has remained remarkably quiet despite headlines about potential restrictions on his business in China, Le noted.

“If it was any other country, Elon would throw a fit,” he said. “His silence speaks to me a lot.”

China is crucial for Tesla. It serves as a huge production base for the automaker and accounted for a quarter of its revenue last year, a proportion Musk expects to inflate. Last year, the CEO predicted that the country would eventually become its “biggest market”.

However, Tesla has faced a series of headwinds in China this year, mainly due to a strict two-month lockdown in Shanghai. The company’s Gigafactory in the city was closed for several weeks, while its sales in the country in April nearly stagnated as more people stayed home.

Musk’s critics also fear that his Tesla interests in China could ultimately be used as leverage over other parts of his sprawling empire, including his space exploration businesses, and potentially Twitter (TWTR) if his takeover of the platform is complete.

Some academics have expressed concerns, for example, that the businessman could come under pressure to stifle criticism of China around the world – if he becomes the new owner of the media network social – in exchange for maintaining Tesla’s position in the world’s largest auto market.

Musk has also helped the Ukrainian military with its Starlink internet satellite system, which has raised suspicions among Chinese state media. Some Chinese social media users have wondered where the CEO’s political loyalties lie.

“All leverage points will try to be exploited,” Le said.

In recent years, Musk has also set an ambitious goal of producing 20 million vehicles by 2030.

But “his goals of world domination, they don’t materialize without China playing a big role,” Le said. “Not just from a demand perspective…but market access, manufacturing, [and continued] friendly policies towards Tesla.

— CNN Beijing Bureau, Steven Jiang and Laura He contributed to this report.


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