Chinese EVs are coming – Should you buy one?

Eliot HochbergMiscellaneous, Opinion, TechLeave a Comment

The Polestar 2 EV is from the Volvo sub-brand Polestar. Did you know Volvo was a Chinese owned company?

If you’ve been paying any attention to the auto world, you’ve heard about how Tesla has been growing steadily, and is now one of the top valued automakers on the back of its four electric vehicles (EVs): Models S, 3, X, and Y. Even during the pandemic, Tesla has been showing massive sales and income, and its stock price has blown past $2000, when it was under $400 in March, 2020. You may then ask: are EVs that popular? Should I get one? That answer is complicated, and beyond this article, but if major automakers are any indication, the EV is definitely seen as at least one potential future for transportation. Ford, Mercedes, Jaguar, Porsche, VW, BMW, GM, Honda, Kia, Hyundai, and Nissan all have EVs that have either been on sale for several years, or will soon be released, and these vehicles aren’t cheap to develop. A combination of concerns about global warming, the success of Tesla, and government incentives have made EV adoption the next big thing in automobiles.

But there’s one other reason you should take EV popularity seriously: Chinese EVs are coming in a big way.

Xpeng has both sedans and SUVs that meet Tesla feature for feature, spec for spec.

Over a dozen Chinese automakers, including Volvo’s Polestar (Volvo is wholly owned by Chinese auto giant Geely) have announced or are already selling EVs in China, and the Chinese government has made their support of an EV future pretty explicit. “Well, great!” you might say, and from an innovation and technical perspective, it is. Chinese automakers have been innovating on range, features, and price, and other automakers should be paying attention. First, because most of them want to be able to compete in the emerging market for vehicles in China, but also because Chinese autos are coming to international shores.

Kandi has already received US approval for its EVs.

What’s the problem, then? Cheaper, more innovative vehicles that can help the environment? “Sign me up!”

Not so fast.

 

Byton, makers of the M-Byte, has been embroiled in financial controversy.

While it is always exciting to see new tech no matter what it is or where it comes from, as we learned from The Good Place, the world is more complicated than that. Or maybe not, in the case of China. This article won’t be about the obvious concerns you might have about Chinese manufacturing; nothing about lead in toys, nor will it be about the treatment of Uyghers in Xinjang, China. To be clear, those are important issues, too, and consumers should diligently be worried about where their electronics, toys, face masks, and so forth, come from, not just if they come from China.

Publicly traded NIO is also aiming at the Tesla segment with its full featured cars. Plus, they are the only EV company with battery swap systems in place.

 

 

Instead, I’m going to be reviewing a big question: should we be worried about the Chinese Communist Party (CCP) trying to use technology in EVs, or dominance in the EV marketplace, to spread totalitarian policies around the world, or surveil non-Chinese citizens? And if so, does that mean we shouldn’t buy Chinese EVs?

BYD is yet another Chinese automaker with their sights on US and EU markets.

Let’s start at first principles: China is a country that for nearly 100 years has been a capital “C” Communist country. What that means is that, rather than being like a commune that we see all warm and fuzzy in TV shows and movies, the leadership leveraged the hunger for fair treatment by workers to create a state where everyone is forced to be the same as much as possible, and where dissidence is met with censorship, harassment, reeducation, imprisonment, or death.

I also want to make some distinctions: throughout this article, I will refer to China, the Chinese Government, and the Chinese Communist Party, or CCP, interchangeably. This, I believe, is generally fair. However, note that I am not making commentary of the Chinese people, or Chinese people as an ethnicity or race. What’s at issue here is the controlling entities of China; the Chinese people are as much a victim of these policies as anyone else might potentially be, and while there may be a subtle difference, when I express my concerns, it is about the system and the government, it is not focused on Chinese people.

This cute EV from great wall echoes designs from Honda, Smart, and Mini.

We’ll also address another issue: liberal democratic countries are no saints, either. While the democratic process provides protection for the day to day life of citizens, there is vast evidence that corporations mistreat workers; that lobbying of politicians leverages their greed to favor one industry over another or to impact citizens’ income or choice; and that political factors can make or break companies. And democracies and republics aren’t immune to mistreating citizens or surveilling them; witness Edward Snowden’s leaks on the NSA. That said, the big difference, in my view, is that where the corruption in countries like the U.S. and members of the E.U. occur because of the actions of individuals and legislation enacted to give them room to be greedy, in China, the negative policies are right there clear as day as part of the fundamental rules of the government and legislation.

Of course, that’s an oversimplified summary of the situation, but I think it sufficiently sets the stage to move on to the next step: so what if China is so authoritarian, why should we worry?

Plenty of reasons.

Failed U.S. carmaker Fisker was bought by Chinese investors and became Karma, using the vehicle design, but moving to pure EVs.

The main reason is something called the “One Company, Two Systems” policy that many companies have to deal with in China. The NBA, Apple, Google, Zoom, and thousands of other companies have had to deal with the stark difference between democratic and Communist policies in order to do business in China. And they do it because of how lucrative the Chinese market has become. The conflict is this: while most companies can run their business however they like so long as they respect consumer safety and privacy in liberal democracies, in China, the government is extremely proactive in ensuring that their citizens’ speech is controlled. To maintain that control, China has passed laws that insist that any Chinese citizen must cooperate with the government should the CCP demand information about users, technology, or other information that the CCP deems important to maintaining their authoritarian state. Not to mention the very strict censorship China enforces on its corner of the web.

Faraday Future followed the Tesla tactic of selecting a physicist’s name for their EV brand.

 

Crucially, these policies highly affect companies that have teams of programmers or hardware developers who are Chinese citizens. Such developers have a Chinese legal requirement to share private user or corporate information with the Chinese government no matter what the company they work for requires, should Chinese intelligence request it. That requirement supersedes any business contract or NDA that an employee may sign.

“Ok then, don’t hire Chinese workers. Problem solved!”

 

Not so fast. Because these companies desperately want to sell to the Chinese market. Failure to comply with Chinese government mandates means ejection from the Chinese market. These mandates include creating wholly Chinese subsidiaries which, by law, are subject to the CCP and Chinese intelligence laws, and of course require the hiring of Chinese workers. While this is all, in some sense, legal, it leads to a chilling result: the CCP leverages the ambitions of companies seeking to sell in China, in order to gain control not just of Chinese citizens, but of the speech and activity of non-Chinese citizens the Chinese government deems to be against the interests of China. In a sense, the greed of multinational companies is potentially leaving non-Chinese consumers vulnerable to being surveilled or manipulated by China.

Take, for example, the NBA. In an October 4, 2019 tweet, Houston Rockets coach Daryl Morey expressed support for Hong Kong citizens who, while historically having more freedom than those in mainland China, were being cracked down on at that time. The simple tweet, “Fight for Freedom. Stand with Hong Kong.” resulted in swift action from the Chinese government. At the direction of the Chinese government, several companies pulled Houston Rockets products and content, including Tencent (owner of Riot Games and investor in Epic Games and thus Fortnite) and Alibaba (a successful online seller, akin to Amazon), two major Chinese companies. While the NBA didn’t bow to alleged pressure to get Morey fired, Morey deleted the tweet, and the NBA apologized for “offending Chinese citizens and Chinese basketball fans.” Now imagine this happening in a free country. Even with all the problems in the U.S., we haven’t cut off ties to European businesses whose customers or management joined protests supporting, for example, the Black Lives Matter movement and defunding the police.

 

Japan listed in this drop down on AA.com…

…but Taiwan not listed here. Image taken August 21, 2020

Or how about American Airlines? Back in 2018, The Guardian (among other news outlets) reported that American Airlines, along with several other carriers such as Hawaiian Airlines, Air Canada, Lufthansa, British Airways, and Qantas, had been pressured with financial penalties if they didn’t change the listing of “Taipei, Taiwan” to “Taipei, Taipei” or any other listing that referenced the existence of Taiwan. For decades, China has denied the existence of Taiwan as an independent state, and asserts its ownership of the island. The rest of the world walks a fine line by working with Taiwan without openly denying China’s claim of ownership. However, actions like this seek to subtly assert China’s position on this issue. It’s an example of China seeking to extend its censorship beyond its borders, and the country has successfully done so.

 

 

Is your Zoom call safe? FBI warns it may not be due to check ins with Chinese servers

That doesn’t hit home? How about Zoom being used to silence discussion of Tiananmen Square? As recently as June of 2020, work-at-home darling Zoom (the video chat app, not the audio recording product company or the children’s television show) has cooperated with the CCP to crack down on the activities of Chinese activists using the tool. Zoom, while claiming to support and hope for greater freedom around the world, succumbed to Chinese pressure and terminated at least three Zoom meetings at the request of the CCP because they included participants from China speaking out against the treatment of Tienanman Square protestors during Zoom calls on the anniversary of the protest. What’s more, they terminated the accounts of those who hosted those meetings, and some non-Chinese citizens were also affected. It has even been reported that Zoom systems were used to monitor meetings (audio and video, possibly automatically detected) to discover which ones were discussing topics distasteful to the Chinese government, and even the possibility that location information was used to arrest some Zoom participants who were having religious meetings. The Chinese constitution claims to guarantee religious freedom, but has several laws controlling which religions are allowed to be practiced and how. Zoom has recently decided not to allow Chinese citizens to directly sign up for paid accounts, which effectively prevents them from having full features on the platform. They can still participate in meetings through a free account, but it’s more of a sidestep of the problem to remove any direct responsibility for CCP actions by Zoom, and therefore avoids repercussions that would affect their bottom line, rather than a principled ethical stand against the Chinese government. It’s worth noting that while Zoom is based in San Jose, CA, nearly 70% of its developers are based in China.

Thomas Friedman was one of the main voices behind the arguments that globalization would create peace and spread democracy.

One final note: in the 1990s and 2000s, the theory went that if we do business with China, that will result in a safer world because of our economic interconnectedness, and an increase in freedom and safety for Chinese citizens. To an extent, that was true, especially during the time when China, despite its large population, was behind the rest of the world technologically and economically. However, things have changed. Companies and countries are now dependent on China for workers and products, and China now leads in many technology sectors. If China were to close itself off, there would be catastrophic economic issues across all sectors. With the U.S. abdicating its previous role as a leader in numerous issues such as global warming, China is taking a lead role to fill that void. And they know they have power to leverage. Where we were influencing them before, now it’s pretty clear they seek to influence us.

 

Concerned yet? Now we get back to EVs.

It has become standard practice following Tesla’s lead that EVs have what are called “Over the Air” (OTA) updates. These updates can enable new features, unlock hidden hardware access, change a vehicle’s self driving capabilities. These updates can occur through a user’s WiFi connection, or through built-in cellular connections through 3G, 4G, 5G, etc. They are super convenient, and allow a manufacturer to correct errors or improve a driver’s experience. One presumes OTA updates can be included in gasoline cars with self driving and infotainment features, but the practice is more common in EVs. It can create great benefits for users, but it hasn’t been without controversy. Several non-auto industry, non-Chinese companies with similar connectivity have been accused of, or admitted to, collecting user data including voice recordings without user permission or knowledge. Ostensibly, this is to improve speech recognition or to get anonymous data to improve ad targeting and the like. But both the U.S. and E.U. have called on companies like Google and Samsung to be more transparent about these policies and activities, and have taken action to prevent companies from misusing user data. It seems like progress on this front is being made. And while users are typically required to affirmatively install these updates, much like with phones, most users will go ahead and install updates whenever they are requested.

This convenience takes on a more sinister potential if an authoritarian nation has access to such a feature. Combine that with laws that require providing personal information for intelligence purposes, and a history of leveraging such tech, and you have a potentially dangerous tool to be used against people who are enemies of that nation. Nations like China.

Take this hypothetical: you are a U.S. citizen who is from China. You want to speak out against the treatment of Uyhghers and frequent a periodic private event with other Chinese expats. Let’s next suggest that you drive an EV with OTA update ability and Chinese hardware or software developers involved. It is conceivable that the Chinese government could require those developers to create a backdoor to that system and, upon discovery of your actions and use of that car, could for instance install software or collect data to track your location to learn where these meetings are taking place, or record conversations in the vehicle using the voice control features. Remember what happened with Zoom.

Or maybe you are using the Android Auto features in your brand new Polestar 2 EV. Your friend tells you about a new restaurant “Taste of Taiwan,” but no matter what you do, you can’t seem to find it on the map that comes in your vehicle. However, when you use your phone, it shows up just fine. Remember what happened with the airlines. While Alphabet and Google have taken a stand against such interference in phones, it is still possible to circumvent those policies in a custom installation if you control the hardware.

Here’s a more Black Mirror-style thought: what if an outspoken Chinese national borrows your Chinese made EV while visiting you. And then, for some strange reason, was discovered to have had a fatal car accident where they drowned because the vehicle went into a lake, later discovered to be due to a GPS directions error? Is this impossible? Does it seem unthinkable? Perhaps not. And don’t forget that it’s not only dissidents at risk. What about their friends and family? China has a reputation for threatening expats with harm to their loved ones within China. Is it that far out to suggest they would use tech available to them to make threats the other way around?

What are the odds China would target you?

Pretty low.

The late Andrew Koenig, seen here arrested while protesting the Chinese treatment of Burma ahead of the Chinese float at the 2008 Rose Parade. Would he be on the CCP’s list?

These are of course hypothetical scenarios. If they were to happen they would be very concerning, but what are the odds it could actually affect you? Honestly, pretty low. For most people, the CCP is unlikely to target you or your vehicle. Only if you were of special interest would there be any reason for you to worry. However, is that satisfactory to you? Would you be okay driving a Chinese made EV, knowing that you were safe because China doesn’t care about you, but that they might use OTA access to cause a self driving system to fail, leading to the death of a CCP opponent, and possibly killing others as a result as well? Or that you couldn’t find the word Taiwan in your infotainment system? What other information might China want to censor outside of their borders?

One thing is pretty clear: if you are a political advocate against China; if you are a CEO doing business with China; if you are a friend or family member of someone like that; if there is any reason at all why the Chinese government might take an interest in you to further its aims across the globe; you probably shouldn’t buy or drive a Chinese made or developed EV that has remote connectivity of any kind. Then again, that may be true of any electronic device or software largely made or developed in China.

 

I should point out that in my research, it does not appear that there are any unusual consumer issues with Chinese vehicles. If you bought a simple EV with no online connectivity, the potential concerns you could have aren’t much different from buying any vehicle. It then becomes a matter of whether or not you think the company will stand behind its warranty, and whether the value vs. cost makes sense to you. And, of course, if you think buying Chinese means you are tacitly supporting their policies, and how that affects your decisions. But that also holds true of any product. Elon Musk is not immune to being boycotted. Neither are iPhones.

Tim Cook, CEO of Apple, at a Chinese Foxconn factory making iPhones

For me, though, it’s my strong feeling that buying a connected EV from a Chinese manufacturer is a bad idea. It is very likely that the way in which the Chinese government controls companies in China means that their tech will be used to harm its own citizens, and possibly to harm non-Chinese citizens outside of China, should that benefit Chinese intelligence or the aspirations of the Chinese government.

None of this is to say that we shouldn’t have similar concerns with electronics, software, or even other goods made in China. We should. And we should also be concerned with the combination of authoritarianism in liberal democracies that’s been bubbling up, and the protectionist and isolationist policies that have created a power vacuum that China is more than eager to fill.

It also doesn’t mean that there aren’t potentially sinister machinations operating in non-Chinese corporations, corrupt democracies and republics, or other national intelligence operations. In my view, though, being concerned about China doesn’t mean we should ignore those concerns. We can and should be concerned about both issues.

Meng Hongwei, former Interpol chief, seen here convicted of bribery by the Chinese government after he disappeared and his wife requested asylum. An alternate explanation is that Meng refused to assist China in leveraging Interpol to track down dissidents.

The difference is that China has made its policy pretty clear, and while they do deny that they would surveil customers of Chinese products in that way, we would be foolish to ignore Chinese laws and the past actions of Chinese intelligence agencies. Or to put it another way: could Tesla build in a sinister backdoor into its vehicles? Possibly, but odds are very low that they would, and they haven’t demonstrated that they would ever want to do that. China, on the other hand, has demonstrated through its well documented actions that it is more than willing to do so.

What’s more, there’s a reason why China is aiming to sell its vehicles outside of China. While the Chinese auto market is huge, it is developing. U.S., EU, and other markets outside of China are already mature, and have the potential for massive short term sales. This means that in those markets, consumers still have leverage over Chinese businesses and interests.

It may be the last leverage we have.

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Eliot HochbergChinese EVs are coming – Should you buy one?