The Biden administration has asked the Department of Commerce to ban the sale of all vehicles that use Chinese software or hardware connected to the Internet. The U.S. is citing national security concerns and has already used this rationale in other sectors, such as AI and semiconductors.
In other words, President Joe Biden plans to ban the sale of any Chinese vehicle connected to the Internet or any Chinese automotive software. The Commerce Department is giving the public 30 days to file potential complaints before the final rule is drafted.
According to The New York Times, the regulation will take effect in 2027 for software and in January 2029 or 2030 for hardware. Additionally, there will be an attempt to boycott Russian companies using the same standard.
Reuters reports that the move comes after a group of lawmakers warned that Chinese manufacturers are allegedly collecting sensitive data while testing their autonomous vehicle technology in the U.S.
If the ban goes forward on current terms, it’ll also affect all software and hardware produced in China, even if the manufacturer isn’t Chinese. According to the same Reuters report, manufacturers have requested some time to adapt to the new regulations.
“With potentially millions of vehicles on the road, each with 10 to 15 year lifespans, the risk of disruption and sabotage increases dramatically,” U.S. national security advisor Jake Sullivan told the Financial Times. He added that a foreign power could potentially control all remotely sold cars, leading to mass accidents or blocking of the vehicles.
From Very Little to None
In May, the U.S. increased a tariff on vehicles manufactured in China to 100%. This meant that Chinese manufacturers had no leeway to bring their vehicles into the U.S. Later, in July, the European Union also announced its own trade barriers.
Even though Chinese vehicles in the U.S. are uncommon, the future of giants such as BYD was uncertain when the new tariff on Chinese-made vehicles was announced. Some rumors suggested that BYD was determined to invest in Mexico to manufacture its vehicles and use the trade agreement between the two countries as a back door to enter the U.S.
If the new rule on Chinese connected vehicles goes through, the U.S. door will be closed forever. In just two years, the sale of any car with Chinese software inside will be banned.
Yet, the biggest problem for the U.S. will come with the prohibition of Chinese hardware in its vehicles. Chinese companies, which manufacture parts such as batteries, cells, and semiconductors, have a strong presence in the electric car supply chain. Compliance with this standard, as initially proposed, may be difficult to achieve.
Manufacturers could have the opportunity to demonstrate, through audits, that the Chinese company providing the hardware doesn’t partake in illegal data collection practices. However, according to the Financial Times, this would be an exceptional circumstance.
Image | Noah Negishi
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