In the days after Vladimir Putin ordered Russian troops into Ukraine, Elon Musk made the decision to support Kyiv.
Fewer than 48 hours later, Musk’s commercial rocket and satellite business SpaceX dispatched a shipment of Starlink satellite kits to fortify the country’s internet network against Putin’s forces.
Musk was commended by the west but his aid was viewed differently by China, a critical growth market for his business empire where Tesla makes a quarter of its revenues.
Now the richest man on Earth is under increasing pressure from Beijing’s national security and data hawks, threatening his access to the world’s biggest consumer market as tension with the US rises and local electric vehicle competitors close in on Tesla.
Blaine Curcio, founder of specialist space technology research group Orbital Gateway, said “significant alarm in China” has been caused because SpaceX and Starlink are considered to be a key part of the “US space military industrial complex”.
Starlink has more than 2,000 satellites in low-earth orbit and Musk plans for thousands more. As the constellation expands and the US-China space race accelerates, experts warn that the billionaire will struggle to balance the competing interests of the rival superpowers.
Beijing’s military planners fear a scenario where thousands of Musk’s satellites are deployed to conduct surveillance of China or, more sensitively, support Taiwan, a democratic country over which Beijing claims sovereignty.
Drew Thompson, a former US defence official, said that Musk’s Starlink donation in the aftermath of Russia’s invasion of Ukraine increased China’s “awareness of the utility and efficacy” of low-earth orbit satellites to help bolster communication systems during war.
Tesla, SpaceX and Musk did not respond to requests for comment.
‘Chaos or calamity’ in $40bn space race
With a commanding position in the fledgling commercial space market — forecast to be worth close to $40bn annually by 2030 — SpaceX has become an important part of Musk’s expanding empire and a growing source of contention in China.
Chinese diplomats in December complained at the United Nations that SpaceX satellites had forced China’s space station to manoeuvre out of the way to avoid dangerous collisions, allegations that sparked a wave of social media abuse of Musk.
The criticism intensified after Putin’s invasion. China Military Online, an official publication of the People’s Liberation Army, last month attacked SpaceX’s deep links to the US armed forces, including commercial contracts with the military, and slammed Starlink’s capacity to “enhance the US military’s combat capability”.
“There is a good chance that Starlink will be taken advantage of by the hegemony-obsessed US to bring the world into . . . chaos or calamity,” the publication said.
PLA research group, the Beijing Institute of Tracking and Telecommunications, went further. In April, the institute’s analysts said defence planners in Beijing should prepare “soft and hard kill methods” to take down Starlink satellites and destroy its operating system.
The threats come as Chinese private start-ups and state-owned groups including GalaxySpace and China Aerospace Science and Technology Corporation are rushing to deploy their own constellations into low-earth orbit to compete with Starlink.
Dexter Roberts, a US-China expert and senior fellow with the Atlantic Council, said state-affiliated military researchers were “very clear” that Starlink “poses a threat to China”.
“Their concern almost certainly is shared by the Chinese government and military,” he said.
Changing fortunes for ‘Silicon Valley Iron Man’
Beijing’s cyber regulators are sharpening their focus on Tesla just as competition from Chinese electric vehicle rivals intensifies.
Tesla’s China business has been immensely successful. The company’s sales revenue from China in 2021 doubled to $13.8bn from the year prior, compared with $23.9bn in the US and $16bn elsewhere.
Last year, six out of the top 10 best-selling EVs globally were Chinese brands, including low-cost Wuling and higher-end BYD. But newcomers Nio, Xpeng, Human Horizons and Jidu Automotive also challenge Tesla because, like Musk, they are banking on a future dominated by driverless vehicles.
The intensifying competition comes as the powerful Cyber Administration of China, along with a suite of security-focused agencies, are rolling out expansive new data security laws, tightening control over data collection and privacy.
Samm Sacks, a senior fellow at Yale Law School’s Paul Tsai China Center, said that “Tesla is under tremendous pressure” over data collection in China, in particular from individuals and near military or politically sensitive sites and its cross-border data flows.
Last year, Tesla promised to store information collected in China in local data centres, a significant blow to its global data gathering efforts critical to research and development.
The challenges confronting Tesla and SpaceX mark a stark shift in favour in China for the 50-year-old Musk, where he is known as the “Silicon Valley Iron Man” and inspires a cult following.
He was courted and given special treatment in 2018 by Beijing to kick start an entire domestic electric vehicle supply chain by building Tesla’s Shanghai Gigafactory for high-end electric and autonomous vehicles.
In an interview with the Financial Times in May, Musk said he considered the rise of Chinese EV makers a threat to his business.
Tesla’s stranglehold on the luxury EV market is loosening. “Tesla is very good, but now the domestic-made cars have made significant progress, there isn’t much need to have Tesla now,” said Boyang Xia, a Tesla owner in Beijing.
Musk has been typically sanguine about his relationship with Chinese officials.
“I think it’s been very successful so far, and the government’s very happy about it,” he said about the Gigafactory, adding that he expected China to account for “probably 25-30 per cent of our markets long term”.
However, June Teufel Dreyer, a China specialist at the University of Miami, forecasts Beijing to eventually impose restrictions over Tesla’s access to the China market.
Roberts is similarly “certain” Beijing will move to impose new restrictions over foreign companies invested in “competitive sectors and especially tech-related sectors”.
He added: Beijing will “limit business practices that [the government] sees as having data and other security implications.”
Musk’s satellites helped Ukrainians in fallen cities keep a lifeline to Kyiv and the world, but for China they helped aggravate suspicion. Musk may find Beijing’s goodwill has limits.
Additional reporting by Maiqi Ding in Beijing, Cheng Leng in Hong Kong and Peter Campbell in London
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