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    In Historic Move, Chinese Province Adds Tesla to Procurement List

    Jiangsu province has become the first local Chinese government to allow public-sector organizations to purchase Tesla cars — a move that has sparked heated debate in China.
    Jul 05, 2024#business

    Jiangsu province has become the first local Chinese government to include Tesla cars in its public procurement program — a historic move that has sparked heated debate in China over potential data security concerns.

    The eastern Chinese province has recently published a list of new energy vehicles that public-sector organizations are allowed to procure using public funds, which includes Tesla’s Model Y SUV.

    The decision means that officials from a range of government organizations in Jiangsu will now be able to purchase Teslas, with the procurement list remaining in effect until April 2025.

    The inclusion of the U.S.-owned company in a state scheme has generated significant controversy in China over recent days, with a related hashtag receiving over 47 million views on the microblogging platform Weibo.

    According to the Jiangsu Provincial Government Procurement Center, Tesla voluntarily applied for the procurement program and passed the review successfully. Though Elon Musk’s company is listed on the U.S. stock market, its cars are eligible for the program as they are manufactured in China.

    “At present, we don’t actually have an official document that prohibits (Tesla) from entering,” a staff member from the center told domestic media. In response to a question from another outlet, the center’s press office added: “Teslas aren’t classed as imports, but as domestically produced cars.”

    Over 95% of the components used in the cars produced by Tesla’s Gigafactory in Shanghai are made in China, state broadcaster CCTV reported.

    The procurement list used in Jiangsu specifies which new energy vehicles are suitable for purchase by government organizations. To qualify, the cars must be priced under 250,000 yuan ($34,400) and meet a number of technical requirements relating to the number of seats, charging speed, and range, among others.

    The Tesla Model Y, priced at 249,000 yuan in China, just falls within the limit. The procurement list also includes cars manufactured by several Chinese companies, including BYD, Chang’an Automobile, and Aito, a brand backed by the telecommunications giant Huawei.

    The news has sparked a mixed reaction on Chinese social media. Though many users expressed concerns about a foreign company being included in a state program, others adopted a more open attitude.

    “It’s just a procurement catalog, not a mandatory purchase order. This gives Tesla the opportunity to compete with other car companies,” read one highly upvoted comment on Weibo.

    Tesla has made great efforts in recent years to maintain strong relations with the Chinese authorities. The company has repeatedly had to push back against questions over its American origins and allay concerns over privacy and data security.

    Last September, CEO Elon Musk made a speech in China during which he stressed that all personal information collected by Tesla in China is stored domestically and will not be transferred overseas.

    In April, Tesla was the only foreign brand to pass the data security inspections conducted by the China Association of Automobile Manufacturers’ Technical Department.

    The company will hope that the procurement scheme can open up new sales channels in China. Tesla has performed strongly in the Chinese market over recent years, with sales growing 37.3% in 2023. But it is currently facing tough competition amid a brutal price war in China’s electric vehicle market.

    China has been encouraging government entities to buy electric vehicles since 2017. In May 2022, the Ministry of Finance called for increased government procurement of new energy vehicles and ships, with some local pilot schemes mandating public organizations to purchase domestically produced clean energy vehicles.

    Contributions: Zhu Yingcui.

    (Header image: VCG)