Citing national security concerns, China is restricting the use of Tesla‘s electric vehicles by some state and military personnel, according to a Wall Street Journal report from Friday. A separate report, from Bloomberg, said the cars were banned in certain areas.
Shares of Tesla were down more as much as 4.4% at one point Friday before recovering. Shares closed up .26%.
It comes after the country led a security review of the vehicles, where it reportedly found that Tesla’s sensors could record images of their surrounding locations. The Journal, citing people familiar with the matter, added that Tesla could obtain key data, like when and where the cars are being used. It could also track more personal information, like a cellphone’s contact list if it’s connected to the car, according to the report.
China is ultimately concerned the information could be sent back to the United States, according to the Journal article.
China’s Defense Ministry didn’t immediately respond to a request for comment.
Tesla’s automated driving features, like Navigate on Autopilot, rely on cameras more than competitors’ systems. Tesla CEO Elon Musk has famously dismissed lidar (light ranging and detection sensors) as too expensive and unnecessary for autonomous systems.
Tesla’s Made in China Model 3 and Model Y took approximately 13% of the electric vehicle market share in China in the first two months of 2021, according to an analysis by JL Warren Capital.
Tesla is facing increasing competition in China, even where features like Navigate on Autopilot are concerned. JL Warren founder and CEO Junheng Li said Xpeng (XPEV) is the first Chinese automaker to use Nvidia hardware to develop advanced driver assistance software in-house, and its system is seen as top-performing in the country, ahead of equivalent products from Nio and Tesla.
On Thursday, SAIC Motor, China’s largest automaker, announced plans to develop automated driving systems using lidar sensors and software from Luminar Technologies
Tesla’s sales in China more than doubled last year to $ 6.66 billion, or 21% of the $ 31.54 billion total. In 2019, Tesla’s China sales reached $ 2.98 billion, just 12% of the $ 24.58 billion total.
Tesla did not immediately respond to a request for comment.
CNBC’s Lora Kolodny contributed to this report.