What is Tesla, with a trillion-dollar market value, planning to do by building a data center in China?

Tesla has entered the trillion-dollar market value club, becoming the sixth company in the history of the U.S. stock market to have a market value of over one trillion dollars. But there are still hidden concerns behind the flowers and applause. As the global leader in new energy electric vehicles, Tesla must firmly plant its feet on the ground with every step it takes.

Tesla, the father of alternating current, who had fought against Edison all his life, eventually became a "myth"; nearly 80 years later, a company named "Tesla" to pay tribute to his indelible technological wealth has inherited the legacy of its predecessors and created another myth in the field of electric vehicles.

On Monday local time, Tesla, the US new energy electric car giant, stood out as all three major US stocks closed higher. In the eleventh year after its listing, it stepped into the trillion-dollar club and became the sixth company in the history of US stocks to have a market value of over one trillion US dollars. As of the close of the day, Tesla rose 12.66% to $1,024.86, and its latest total market value reached $1.03 trillion.

Many people are puzzled as to why Tesla, which is an outlier in the technology circle, can create "myths" one after another. At the end of 2020, Tesla created a market value of 631.29 billion US dollars with less than 1% of the global automobile sales, surpassing the combined market value of nine traditional automakers including Volkswagen, Toyota, Hyundai, and General Motors. Today, Tesla has exceeded one trillion US dollars, while other automakers can only look on.

There are many reasons, but the most important one is Tesla's strategy of "playing the long game and catching the big fish". Tesla is too good at future-oriented and value-oriented investments. The market release of electric vehicles has now exceeded the critical point. The trend of fuel vehicles being eliminated in the next few years or more than ten years is obvious. Electronic products are added to electric vehicles, which has contributed to the continuous rise in the value of cars. Therefore, once there is a little movement in the market, it is very likely to push Tesla to a new height.

For example, this time everyone regarded the purchase of 100,000 Tesla electric vehicles by Hertz Global, the century-old American car rental giant, as an important "contributor" to Tesla's successful breakthrough of breaking the trillion-dollar mark.

However, there are still hidden concerns behind the flowers and applause, and the risks of Tesla's skyrocketing market value cannot be ignored. The electrification of automobiles has brought a series of problems. As the global leader in new energy electric vehicles, Tesla must firmly step on the ground with every step.

Tesla is caught in a storm of public opinion, and data is the key

In fact, the day before Tesla's market value soared, another piece of news that attracted much attention was circulated online, that is, Tesla's Shanghai R&D Innovation Center and Tesla Shanghai Super Factory Data Center were completed and put into use recently. According to relevant news reports, the completion of the two centers means that Tesla's localization process in China has taken another step forward, and it is also a new exploration of Tesla's overseas R&D.

In fact, the completion of the data center is a decision made by Tesla for business compliance. As early as May this year, Tesla responded to the requirements of Chinese regulators and announced the establishment of a data center in China, which has achieved localized data storage and ensured that all data generated by vehicles sold in the Chinese mainland market are stored domestically.

Don’t underestimate this news. Data is the “crude oil” of the Internet of Things era. The industry has long reached a consensus. The mainstream view in the industry is that data, the raw resource of everything, contains too much potential energy. On the one hand, it is the technological and commercial potential for realizing the intelligent world. On the other hand, it means more unknown threats, challenges, conflicts of interest and gray areas.

From a business perspective, only when data ownership is in the hands of enterprises can the interests be maximized and innovative business models be achieved. But the first question is whether the data should belong to the enterprise or the user? From a regulatory perspective, data security has a clear bottom line and principles. Regulatory authorities in almost all countries around the world will participate in data supervision. This is inevitable for the healthy development of an industry and an enterprise. Then the problem becomes more complicated, involving not only users and platforms, but also government regulators.

On July 2 this year, the official website of the Cyberspace Administration of China announced the "Announcement of the Cybersecurity Review Office on the Initiation of Cybersecurity Review of Didi Chuxing." For a time, discussions on preventing national data security risks became a hot topic. In addition, giants such as Google, Amazon, and Facebook continued to receive various fines from global data regulatory authorities. This process of supervision and being regulated is actually a process of constantly defining the scope of data application.

You can choose not to believe in God, but you must believe in the Chinese market

As we all know, Tesla electric cars are equipped with a series of sensors, mainly cameras, to collect road data. Therefore, the outside world often expresses concerns that the Chinese data collected by Tesla will be outflowed abroad, posing a challenge to national security.

Earlier, the Wall Street Journal reported that the Chinese government has banned Tesla electric vehicles from entering military units and sensitive departments, and restricted the use of Tesla electric vehicles by military personnel, state-owned enterprises in sensitive industries, and important agencies. Although these reports have not been confirmed, Tesla is still very aware of such data security considerations.

At the "China Development Forum 2021", Musk publicly responded: "For commercial enterprises, whether Chinese or American, if they really engage in espionage, it will have a huge negative impact on the enterprise."

In addition, due to a series of negative news, such as the rights protection car owner accusing Tesla of brake failure at the Shanghai Auto Show, saying that the vehicle data claimed by Tesla was untrue, and questioning Tesla's 48 pages of pre-accident driving data, it also triggered a series of battles for user data ownership.

In order to standardize the data collection of smart cars, on April 7 this year, the Ministry of Industry and Information Technology issued the "Guidelines for the Access Management of Intelligent Connected Vehicle Manufacturers and Products (Trial)" (Draft for Comments), which clarified the requirements for the collection, storage and use of personal information by intelligent connected vehicle manufacturers, as well as the prohibition of leakage and local storage of national security information and important data.

In May this year, Tesla announced that it had established a data center in China to localize data storage, and would gradually add more local data centers to ensure that all data generated by vehicles sold in the Chinese mainland market is stored within the country. Tesla China also stated that it would open the vehicle information query platform to car owners. Although this measure has not yet been implemented, it at least allows the outside world to see that Tesla's attitude has changed.

Tesla's recently released third-quarter financial report showed that its total revenue in the third quarter was US$13.757 billion (approximately RMB 87.557 billion), a year-on-year increase of 57%; in terms of net profit, it was US$1.618 billion (approximately RMB 10.345 billion), a year-on-year increase of even 389%.

There is no doubt that China is one of Tesla's most important markets. According to the China Passenger Car Association, Tesla's sales in September exceeded those of NIO, Xpeng and Li Auto with more than 50,000 units. From January to September, the total sales of the three companies of more than 170,000 units could not catch up with Tesla's sales of more than 200,000 units.

Tesla may be able to go further by following the "Apple model"

For Tesla, establishing a localized autonomous driving R&D team and a localized data center for the domestic market is not a bad thing. Instead, it will become a good foundation for its future technological iteration and market expansion.

As early as 2017, the "predecessor" Apple has embarked on a path suitable for "Sinicization" development. That year, the iCloud China Data Center was established in Guizhou. On the one hand, it was for compliance and adherence to the "Cybersecurity Law of the People's Republic of China"; on the other hand, it was for the stability of user data connection and transmission experience. It can be said to be a win-win approach.

Although Tesla's current data center establishment may not hand over the data platform operation rights like Apple, it may become a turning point for domestic automobile data security. From the perspective of data security and personal privacy protection, the establishment of a local data center is inevitable in the current era of increasingly stringent domestic data supervision. From the perspective of the development of intelligent vehicles, it also lays the foundation for enterprises to introduce higher levels of autonomous driving in the future to meet local market needs.

In addition, this behavior may also form a trend of imitation in the market. According to news reports, multinational automakers including BMW, Daimler, and Ford have stated that they will establish data centers in China to store data generated by their cars locally.

Ford Motor Company said it had established a data center in China in the first half of 2020 and stored all vehicle data locally; BMW also said it would operate a local data center in China for the Chinese fleet, but it did not specify when it would start; Daimler said it already operates a dedicated automotive backend in China to store vehicle data.