Tesla said Tuesday it had established one data center in China to store information generated by local customers and plans to build more to keep in line with new government regulations.
“All data generated from the sales of vehicles in the Chinese mainland market will be stored in China,” Tesla said in a statement on its official Weibo page, withholding details on the location, cost or size of its new data center.
Beijing proposed legislation in April that requires automakers to store user data in China and obtain special permission to send any data abroad. China already has a rule requiring firms to store Chinese data on Chinese servers—the so-called Cybersecurity Law, which was enacted in 2017.
The regulation specific to automakers suggests the 2017 law omitted car companies, and some analysts suspect the April restrictions were drafted with Tesla in mind.
But, given the pre-existing Cybersecurity Law of 2017, Tesla likely knew it would be required to keep data in China when it broke ground on its Shanghai Gigafactory in 2018—a manufacturing plant Tesla developed with help from government loans and subsidies.
Tesla didn’t respond to Fortune‘s request for comment on the company’s data practices prior to developing its new data center.
“Maybe data security was lower on the totem pole for the government when it invited Tesla in to China, and Tesla was allowed to develop sales first,” says Tu Le, founder of Beijing-based consultancy Sino Auto Insights.
Producing cars locally cut Tesla’s Chinese retail price and helped the EV-maker race ahead to become the market leader in passenger EV sales in China last year. But the government has recently grown wary of Tesla’s data gathering toolkit. In March, the Chinese military banned Tesla vehicles from its premises, arguing the cars posed a national security threat.
Tesla denied it uses its vehicular sensors for spying and even claimed Tesla’s onboard cameras are switched off outside of North America. Beijing’s new regulations suggest the government is unconvinced.
Le says Tesla likely used a third-party cloud service provider to store Chinese data and is now bringing that data in-house.
On Tuesday, Tesla also announced it would open a “vehicle information query” platform to Chinese users, which will allow customers to access data generated by their own vehicles. The platform marks a reversal from Tesla’s previous “no compromise” policy on sharing data with users.
The car company had refused to provide a customer with data about a Tesla crash, prompting the woman to stage a protest at the Shanghai Auto Show in April. State media blasted Tesla for its “arrogant” response and the State Administrator for Market Regulation (SAMR) lambasted the company too.
“Just being empathetic and saying sorry might have avoided a lot of headaches on Tesla’s part,” Le says. Tesla China sales slumped to 25,845 units in April, down from over 35,000 in March.
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