China's tech regulator orders smart vehicle makers and telecom operators to enhance data and network security

a sweeping Data Security Law

China’s main technology industry regulator has urged telecommunications companies, internet of vehicles (IoV) manufacturers, and relevant service providers to ramp up data security, in a new regulatory push that could increase compliance costs for firms such as Tesla in China.

The Ministry of Industry and Information Technology (MIIT), one of China’s top government bodies overseeing the smart car industry, asked companies to carry out “network security compliance evaluations and risk assessments” on a regular basis to eliminate hidden risks in a timely manner, according to a notice published Thursday. Businesses are required to retain collected data for at least six months.

China’s drive to strengthen the management of data generated by increasingly intelligent vehicles is part of a broader national campaign to bolster the government’s control on digital data. Smart cars, which can record data related to the vehicles’ operation as well as road conditions and location information, are seen as a key area for regulation.

In March, a screenshot of an order issued at a Chinese military accommodation complex banning Tesla vehicles went viral on social media. The notice cited concerns over the potential security threat posed by the cameras and ultrasonic sensors fitted inside Tesla cars, prompting the carmaker’s founder and owner Elon Musk to speak out in defence of his company’s data protection practices.

While Tesla has data centres in Shanghai to store data collected in China, some Chinese government and military compounds continue to ban the brand’s vehicles from entering.

Wednesday’s notice from the MIIT requires intelligent and connected vehicle (ICV) companies and IoV platform enterprises that send “important data” collected in China overseas to conduct data security assessments in accordance with laws and regulations. They also need to report to local regulators.

These companies, including state-owned China Mobile, China Unicom and China Telecom, are encouraged to make use of a security management platform run by MIIT to promote “cross-model, cross-facility, and cross-enterprise connection”.

This came three months after China’s top legislative body passed a sweeping Data Security Law that took effect on September 1, enhancing the government’s authority over commercially-collected data and promising hefty punishments for any transgressions.

Beijing’s recent directives demonstrate a change in regulatory attitude, according to an expert.

“In the past, the government’s approach was ‘develop first and then regulate’, but now it is ‘plan to manage and regulate first and then develop’,” said Zhang Xiaorong, director of the think tank Beijing Cutting-Edge Technology Research Institute.

Zhang said that as ICVs proliferate, IoV will also see fast development. As a result, the government needs to step up data and network security for the sector, just as it did for the internet.

Shares of Xpeng and Li Auto, two of China’s biggest Chinese electric vehicle makers, fell 1.29 per cent and 0.96 per cent respectively at market’s close in Hong Kong on Thursday.

The Chinese government is pushing ahead on its 2021-2035 development plan for so-called new energy vehicles (NEVs), released by the State Council last November. One major goal is to ensure that green vehicles, including electric cars and hybrids, will make up 20 per cent of all new cars sold in China by 2025.

The green vehicle industry, which has been booming thanks to heavy government subsidies, has been further boosted by President Xi Jinping’s pledge last year for China to become carbon neutral by 2060.

China is currently the world’s largest automobile market. Last year, 1.17 million NEVs were delivered in the country, up 12 per cent year on year. A bullish forecast by Swiss bank UBS in March projected a sixfold increase from this year to 6.6 million units in 2025, with one in every four new cars sold then powered by batteries.

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