- The U.S. Department of Commerce has proposed a ban on "the sale or import of connected vehicles" and their components from China and Russia.
- If finalized, the rule could effectively ban Chinese automakers in the U.S. entirely if their vehicles use connected technology.
- While the rule aims to protect "national security," it also protects automakers unable to keep up with China technologically.
Tough new tariffs on electric vehicles made in China were one thing. But if new proposed rules from the U.S. Department of Commerce go into effect, the sale or import of cars with hardware or software links to China would be banned by the close of this decade.
Officials with the Commerce Department’s Bureau of Industry and Security (BIS) announced the proposed new rules today, saying that cars, trucks and buses with connected features linked back to China present risks to U.S. national security and to its citizens' data privacy. The proposed rules specifically target vehicle connectivity systems and automated driving systems, both in terms of hardware and software. News of the move was first reported by Reuters this weekend.
"Malicious access to these systems could allow adversaries to access and collect our most sensitive data and remotely manipulate cars on American roads," Commerce Department officials said in a statement. "The prohibitions on software would take effect for model year 2027 and the prohibitions on hardware would take effect for model year 2030, or Jan. 1, 2029, for units without a model year."
Put more simply, these new rules—if finalized—could pose a mortal blow to Chinese automakers seeking to enter the U.S. market, even though potentially made in Mexico (or even domestically, as former President Donald Trump has suggested during his reelection bid.) After all, it's difficult to fathom a world where any U.S.-market cars from Chinese automakers would not have hardware or software links back to their country of origin.
The proposed rule covers software that enable automated driving (but not lesser driver-assistance features) and vehicle connectivity to satellite, cellular and Wi-Fi networks, a senior administration official said. The hardware component takes aim at vehicle connectivity systems but only parts with connectivity capability, they said. The proposed rule defines automated driving systems as those rated Level 3 through 5 by auto industry standards. Level 1 and 2 systems, which involve cruise control and lane keeping but always require driver supervision, would not restricted by the rule.
The rules also target automotive hardware and software from Russia, also under the premise of national security, although Russia is hardly the global automating and technology titan that China is.
Administration officials began investigating the risks of connected Chinese cars and car technology in late February.
“Cars today have cameras, microphones, GPS tracking, and other technologies connected to the internet," U.S. Secretary of Commerce Gina Raimondo said in the statement. "It doesn’t take much imagination to understand how a foreign adversary with access to this information could pose a serious risk to both our national security and the privacy of U.S. citizens. To address these national security concerns, the Commerce Department is taking targeted, proactive steps to keep [People’s Republic of China] and Russian-manufactured technologies off American roads."
The proposed rules are the latest crackdown by the Biden Administration on the potential entry of Chinese cars—specifically EVs—into the U.S. market. Earlier this year, officials announced new 100% tariffs on EVs made in China, leading to the delay of the Volvo EX30 in the U.S. market until it can be manufactured in Europe. The tariffs also seem to delay the entry of Chinese automakers like BYD, Nio, XPeng and the various members of the Geely Group into the U.S. as they continue to soak up market share in Europe and Latin America.
China's automakers are widely regarded as significantly ahead in the EV and software race, as InsideEVs can attest after traveling to the Shangai Auto Show earlier this year.
In theory, if those automakers were to build factories in Mexico—as several of them are either doing or considering—with the goal of exporting to the U.S., they would sidestep those tariffs. But cracking down on software and hardware specifically from China could seek to keep those cars off American roads even longer, if not indefinitely. So while the Commerce Department's proposed rule stresses national security concerns, it could also have the net benefit of keeping companies like General Motors from having to compete directly with the likes of BYD.
Administration officials said the new rule relates to software and hardware that is designed, developed, manufactured or supplied by entities owned by, controlled by, or subject to the jurisdiction or direction of China or Russia. In other words, it also seems to target companies that may be set up to localize or even license those technologies as well. This would also likely keep Chinese suppliers from establishing a larger presence in the U.S.
U.S. officials and China critics have long warned of the hypothetical risks of connected, camera-equipped cars from a major geopolitical adversary on American roads. One fear is that these cars could unknowingly collect location or visual data on sensitive areas like government installations or military bases, or even pose threats to driver safety with remote control of features like automated driving.
The proposed rule is also hardly the first time the Biden Administration has acted with national security in mind to target new services and technologies from China. Perhaps the most notable example as of late is what appears to be a looming ban or forced sale of the ultra-popular social media platform TikTok, which is owned by a Chinese company. TikTok has been arguing against either outcome in federal court, but a panel of three judges has appeared skeptical of its "free speech" arguments superseding national security concerns.
At the same time, the nuances of an effective ban on Chinese connected car tech remain extremely unclear. For example, what impact could they have on companies like Volvo or Polestar, which are owned by China's Geely Group and presumably have some hardware and software connections to that country? And what could it mean for Western automakers potentially engaging in new technological tie-ups with Chinese ones. How will China respond to this rule if it becomes finalized, and what could that mean for automakers like GM, Ford and others operating in China?
According to Bloomberg, Commerce officials aim to finalize this rule in January after taking public comment for 30 days. How the auto industry responds, and how China responds, could define much of the global EV race for years to come.
Contact the author: patrick.george@insideevs.com
Update September 23 11 am: Clarified definition of automated driving systems to include Level 3-5 software.
