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The local EV brands have showcased their AI chops at China’s annual car show in Beijing. And with many of these vehicles ready to land in Australia, there is one issue that’s slipping through the cracks.

Beijing: Under the bright lights and flashy displays at China’s annual auto show, electric vehicle companies are pulling out all the stops to lure in customers and push further into overseas markets.

China’s EV golden child BYD sought to wow audiences with its five-minute “flash” charging technology, even setting up a frozen cage set to minus 30 degrees to demonstrate their vehicles could charge in sub-zero climates.

Xpeng spruiked its inhouse “super brain” AI chip that powered its vehicles’ autonomous driving functions. The same chip, it says, will enable its prototype flying cars to be mass-produced and take to the skies by 2027. Other companies deployed humanoid robots alongside the vehicles to help capture the attention of live-streaming influencers at the show.

On their home turf, Chinese EV brands are locked in a price war death spiral. With the exception of BYD and a handful others, most brands are unprofitable and face collapse when state subsidies and tax breaks dry up. Its fuelled a technology race to make their vehicles as “smart” as possible as they chase an edge over their rivals while constantly trimming their profit margins.

At the same time, the Iran war has handed them an opportunity to ramp up exports – which have boomed by 140 per cent from March last year – as motorists, including Australians, have rushed to make the switch to EVs to escape sky-high fuel prices triggered by the throttling of the Strait of Hormuz.

But as more Chinese EVs land on Australian roads, the national conversation has largely bypassed a discussion of the potential security risks of foreign companies hoovering up vast amounts of personal data.

Simeon Gilding, a former director-general of the federal intelligence agency Australian Signals Directorate, says cars’ smart software systems generated extensive data on vehicle and battery health and diagnostics, GPS location, and potentially devices connected to the car. This posed an espionage risk and, in extreme circumstances, a sabotage risk if accessible by authoritarian governments, he says.

“We’ve got to the point where Chinese EVs have a dominant market position, and therefore you have to at some point ask, are our cars critical infrastructure? Are they collectively as important as power stations, for example, and do they need to be regulated?” he says.

Across China’s heavily saturated EV industries, companies are racing to embed AI agents into their vehicles, aiming to transform “connected” cars into responsive machines that can act on voice commands and perform tasks such as parking the vehicle, booking hotels, and ordering food.

BYD and Geely are already collaborating with Chinese AI juggernaut DeepSeek on their smart technology, while other companies have partnered with Chinese tech giants Huawei and Alibaba, as well as finessing their own AI models.

“There’s no longer a distinction between a technology company and a car company,” Nissan Motor China chief Stephen Ma told reporters on the sidelines of show on Friday.

More than that, China is churning out cars that are not only cheaper but technologically superior to its Asian and European rivals. It is not just the world’s biggest EV factory, China also controls the battery supply chain and is a major player in car software development.

“China’s got the most advanced robotics and mechatronics. It’s got armies of engineers. And, as a result, the products that are coming out of China now, particularly the EVs, from a technical perspective are more advanced than anyone else’s – and they cost less,” says Mike Costello, a Melbourne-based auto analyst.

Spurred on by the fuel crisis, Australians have been keen to jump on the EV bandwagon, with sales jumping at least 50 per cent in March, according to statistics gathered by industry lobby groups.

Costello says BYD is the big beneficiary, estimating it is on track to deliver 30,000 cars to Australian shores by June which could see it become the second biggest-selling brand behind Toyota by the end of the year. It’s an astonishing penetration rate, given it only began selling cars in Australia in 2022.

The uptake of EVs is one that Energy Minister Chris Bowen has been eager to champion while the government races to lock in more fuel supplies, saying EV use has helped conserve 15 million litres of petrol a week.

EVs are also critical to the government’s climate goals, with increasing uptake contributing to the first-ever reduction in Australia’s transport sector emissions, outside of COVID, this year.

To keep things in perspective, about one in seven cars sold in Australia in March was electric, a record but still lagging the global average of 20 per cent last year. Whether this is a fuel crisis-fuelled spike, or a new baseline is not yet clear.

“According to most of the research, when somebody switches to an EV, they tend not to switch back. So if you can convert them once you probably got them locked in,” Costello says.

“Clearly the brands that are most ready to capitalise on that are the Chinese because they’ve got the most products.”

Already, 80 per cent of the EVs sold in Australia are made in China, although this figure also includes Teslas, which are built in the company’s Shanghai’s factory.

As former boss of the signals’ directorate, Gilding led the agency’s assessment of Chinese telco Huawei, which informed the Turnbull government’s world-leading decision to block it from building Australia’s 5G network.

He is cautious not to overstate the parallels between the Huawei ban and Chinese EVs, but says that the same underlying concern exists: that under China’s intelligence laws, the state can compel access to private companies’ data and connectivity.

“Governments from small to medium powers like ourselves have to think carefully about whether the risk is big enough to justify taking [regulatory] action and annoying the Chinese and denying consumers access to cheap and good Chinese gear, like their EVs,” he says.

For now, the Australian government appears to have decided no. It has not followed the US in banning the use of Chinese software and hardware in smart vehicles on national security grounds.

When the Biden Administration was pursuing the ban, then-US Commerce Secretary Gina Raimondo likened connected cars to “smartphones on wheels” and invoked the spectre of “somebody in Beijing” disabling millions of cars on the road simultaneously.

The ban, together with 100 per cent tariffs on Chinese vehicles, has barred China’s access into the US auto-market, shielding the local industry from competition.

The intense rivalry between the US and China, shaped by years of trade wars and export controls, has blurred the lines between economic measures and national security concerns, with policy dragnets sweeping up one under the guise of the other.

For its part, China has also implicitly acknowledged the security risk posed by connected vehicles and in 2021 banned Teslas from entering its military complexes over concerns the vehicles cameras could be collecting data.

In Australia, the public debate about risk has largely played out in Senate Estimates hearings, where Home Affairs Minister Tony Burke’s decision to drive a Chinese EV as his personal car has been scrutinised.

Under questioning from Liberal Senator James Paterson last year, Home Affairs officials acknowledged that Burke had sought briefings on the matter from Australia’s security agencies and had been advised not plug his work phone into the vehicle as a mitigation measure.

The officials also gave evidence that connected vehicles, regardless of origin, could potentially listen in on conversations, have their movements mapped, and record footage, but some vendors posed greater risks due to their relationships with foreign governments, including China.

As the nexus between China’s EV and AI industries tighten, questions about data security and regulation are sure to increase. The Albanese government has already banned DeepSeek from government-issued devices, citing an “unacceptable risk” to national security. It’s not clear if, or when, DeepSeek-integrated EVs might start hitting Australian roads. BYD did not respond to a request for comment.

Burke’s office did not directly respond to questions about whether he has sought assurances from Chinese EV companies about where and how they store their data, or whether the government had considered extending its public sector ban on DeepSeek to vehicles that use it.

In a statement, Home Affairs said the department was continually assessing policy settings, and confirmed smart cars transmitted a wide variety of data in real time to manufactures and third-party providers.

It recommended buyers “carefully review the privacy and data collection policies of the manufacturer before deciding to buy a connected vehicle” and said owners “should also disable vehicle data sharing where possible”.

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