China is banning Tesla owners from driving near the government’s summer retreat, another sign Beijing considers the vehicles U.S. spies
The Chinese government appears to be treating Tesla as a national security risk.
On Tuesday, Reuters reported that local police would ban Tesla vehicles from entering the coastal Beidaihe district of Hebei province for two months beginning July 1 as the eastern city prepares to host the Chinese Communist Party’s annual summer retreat.
Reuters says the local official that provided the information declined to explain why Tesla cars would be prohibited, beyond saying the ban was due to “national affairs.” Tesla did not immediately respond to requests for comment.
The government always keeps details of the annual meeting of top party officials in Beidaihe a secret. The summer session happens every year, but the conference’s exact dates are kept under wraps.
The new prohibition against Tesla comes weeks after police in Chengdu, in China’s Sichuan province, herded Tesla vehicles away from certain areas of the city while China President Xi Jinping was visiting.
In March last year, the Chinese military banned Tesla cars from entering its complexes, citing security concerns related to the external cameras installed on Tesla vehicles. Meanwhile, the government reportedly instructed some state-owned industries to ban staff from driving Tesla cars.
Like many modern vehicles, Tesla models come equipped with a host of sensory equipment, including onboard cameras that provide drivers with an external (often rear facing) view to assist with maneuvers like parking or changing lanes. Cameras are also crucial for Tesla’s autopilot mode.
Taken together, reports of China’s restrictions on Tesla suggest that official bodies fear data captured by the vehicles’ cameras—such as images of sensitive buildings or license plates—could be transmitted to overseas servers and potentially handed to, or obtained by, the U.S. The privacy of personal user data could also be a concern but wouldn’t explain why the government is banning Tesla owners from even driving past certain districts.
After the Chinese military banned the automaker’s cars from its bases last year, Tesla CEO Elon Musk denied the company uses its vehicles for spying. Tesla also claimed that the cameras onboard its vehicles aren’t switched on outside of North America.
But later last year, Tesla announced that all data generated by its vehicles within China would be stored on servers kept inside China to abide by new rules the government created to target how vehicles manage and store data in China. China already had a law mandating how tech companies store user data within the country, but lawmakers apparently grew concerned that data gathered by vehicles presented a loophole in the law, and so they introduced the new provision.
The government’s increased suspicion of Tesla is a turnaround from the red-carpet treatment officials rolled out in 2019 when the automaker opened its gigafactory in Shanghai—Tesla’s first production facility outside the U.S. China subsidized construction of the facility and granted Tesla a license to operate as a wholly owned foreign enterprise within China, rather than forcing the electric-vehicle maker to partner with a local manufacturer, as foreign automakers are usually made to do.
The Shanghai gigafactory has become Tesla’s most productive plant worldwide, and China is the automaker’s fastest-growing market. In March, Tesla was the leading EV maker in China by sales, delivering 65,184 units, up 15% from February. But sales tanked 98% in April, as Shanghai entered a monthslong COVID lockdown that decimated production at Tesla’s factory and killed consumer appetite.
Local rivals like NIO and Xpeng are increasing their share of the local market too. Faced with competition and stalled sales, being treated as a national security threat in China is another headache Tesla doesn’t need.
Sign up for the Fortune Features email list so you don’t miss our biggest features, exclusive interviews, and investigations.