Elon Musk has said Tesla would be "shut down" if accusations that the firm's cars could be used for spying purposes were true.
Last week, the Wall Street Journal reported that the Chinese government has restricted the use of Tesla vehicles in military and key, state-owned company settings.
Military and government staff are reportedly not permitted to drive these cars into such facilities due to the worry that Tesla vehicles could be used for covert data-gathering.
People familiar with the matter told the WSJ that following a government security review, Chinese officials became concerned that Tesla's smart car features could be abused for spying purposes.
Tesla vehicles, including the Model X, Model S, and Model Y, are electric vehicles (EVs) that come equipped with features including driver assistance, built-in mobile connectivity, an infotainment dashboard, cameras and sensors for driving, maps, and more.
However, the concern is that data-grabbing features -- such as cameras or connectivity apps -- could be used, with or without the driver's knowledge, to obtain information on these facilities.
Tesla's CEO and entrepreneur Elon Musk has commented on the Chinese government's scrutiny of Tesla vehicle features, saying that, "if Tesla used cars to spy in China or anywhere, we will get shut down."
Speaking at the China Development Forum, Musk added that Tesla has a "very strong incentive" to treat data confidentiality seriously, as reported by the Reuters news agency.
The United States and China have clashed over technology and national security for years, with both countries often citing national security concerns when changes in export rules are made, as well as impositions of vendor and country-specific technological product bans.
Perhaps the most high-profile case recently is that of Huawei, which together with ZTE, has been branded a national security threat by the US Federal Communications Commission (FCC).
The FCC has also recently added Hytera Communications, Hangzhou Hikvision Digital Technology Co., and Zhejiang Dahua Technology to a national security blacklist, which may restrict US companies in purchasing or installing equipment produced by these vendors.
In diplomatic talks between the US and China last week, China's foreign minister Wang Yi has accused the US of using its military and financial might to "obstruct normal trade exchanges."
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