Tesla's China sales had their best month ever—but a new data law looms large

Sales of Tesla’s China-made cars hit a new monthly high in September as the soon-to-be Texas-based electric vehicle company continues to outpace local competitors in China.

Tesla shipped 56,006 vehicles from its Shanghai plant last month—a 27% increase on the month before—with most of the units purchased domestically, the China Passenger Car Association (CPCA) reported Tuesday.

Data from the CPCA shows Tesla exported just 3,853 China-made vehicles in September, which is a dramatic decline from the 31,379 vehicles—out of 44,264 units total—that the carmaker exported in August, primarily to Europe. According to Bloomberg, the drop in exports “follows a pattern of Tesla prioritizing overseas shipments in the first half of the quarter, before ramping up local deliveries in the latter half of the period.” Taken on their own, Tesla’s domestic China sales surged fourfold in September.

By comparison, the CPCA reports, Chinese electric vehicle makers Nio and Xpeng delivered over 10,000 vehicles each last month. Shenzhen-based BYD did outshine Tesla in September, shipping over 70,000 so-called new energy vehicles, which include pure-play electric vehicles as well as hybrids. But only 36,000 of BYD’s total sales were pure battery EVs—the type Tesla deals in.

Tesla didn’t respond to a request for comment on the data. Although Tesla doesn’t disclose sales by region, CEO Elon Musk said at a shareholder meeting last week that the company is now producing more cars in its Shanghai plant, opened in October 2019, than it is in its original base of California.

Tesla is dominating China’s passenger car segment despite a spate of bad publicity for the brand, which peaked in April when a dissatisfied customer climbed on top of a Tesla during the Shanghai Auto Show to protest the company denying her access to data collected by her father’s car, which crashed owing to an alleged brake failure.

After initial grandstanding, in which Tesla vice president Grace Tao said there was “no possibility Tesla will compromise” on the issue, the carmaker buckled, conceding to the protester’s demands after the government chastised company executives for their “arrogance.” A month later, Tesla developed new tools for granting consumers access to their own data. But data from EVs and other smart vehicles continues to be a thorny subject for Beijing.

On Monday, the Ministry of Industry and Information Technology (MIIT) said it would begin “assessment measures” for regulating if and how car companies send data collected from Chinese vehicles out of the country. Beijing is loath to let any data on Chinese consumers pass outside its jurisdiction and has, since 2017, forced tech companies to keep Chinese data on servers in China. But that regulation overlooked smart vehicles.

In April, Beijing drafted a new law to close the loophole that allowed vehicle operators to export data freely. The law, which came into effect on Oct. 1, requires carmakers to obtain special permission from the government before exporting driver data, which are the “assessment measures” the MIIT is now formulating.

The MIIT didn’t specify how it would conduct the assessment nor what rules it will likely create to regulate international data transfers in the vehicle sector. For Tesla, which uses driver data to develop its self-driving algorithms, the assessment measures could determine whether information Tesla collects in China is siloed from use in its global operating systems.

However, the carmaker has already showed its willingness to comply with the new data restrictions. Within a month of Beijing saying it would create new rules to govern auto data, Tesla established a new data center in China to store Chinese user data and pledged that “all data generated from the sales of vehicles in the Chinese mainland market will be stored in China.”