Earlier this month, the US government increased tariffs on Chinese electric vehicle imports, signaling a stricter stance on China-made automobiles entering the US market. On Monday, the US Commerce Department proposed a new regulation aimed at prohibiting certain automotive hardware and software manufactured in China and Russia from entering the country, with software restrictions potentially starting as soon as 2026.
The Biden administration cited national security concerns as the rationale behind this move, emphasizing the critical role of technology in modern vehicles. Commerce Secretary Gina Raimondo highlighted the potential risks associated with internet-connected features such as cameras, microphones, and GPS equipment in vehicles. Raimondo stressed that access to such information by foreign adversaries could pose significant threats to both national security and the privacy of US citizens.
This decision comes amid a substantial increase in Chinese automotive exports, especially electric vehicles, which grew by more than 30% in the first half of the year. This surge has raised concerns in both Europe and the US about the impact of low-cost Chinese vehicles on their domestic industries. While Europe and the US have taken steps to make it more challenging and costly for China to export cars to these markets, Chinese automakers have responded by establishing manufacturing bases in Eastern Europe, Africa, and Mexico. These locations could potentially serve as loopholes to facilitate the entry of Chinese-designed vehicles into Western markets.
However, the proposed rule is focused primarily on security rather than economic competition. Raimondo had previously warned about the dangers of foreign actors exploiting connected car technology to disrupt public safety. In February, she illustrated the potential threat by imagining a scenario where Beijing could simultaneously disable thousands of Chinese-connected vehicles on American roads.
Despite the hypothetical risks, the involvement of Chinese and Russian firms in the US automotive software and hardware markets is currently minimal. As indicated by Steve Man, global head of auto research at Bloomberg Intelligence, the proposed ban is a preemptive measure rather than a reaction to an immediate security threat. A senior Biden administration official confirmed that Chinese and Russian automakers do not significantly impact the US auto market at present.
The rule would apply to all connected vehicles, not just electric ones, intensifying restrictions on Chinese-made automotive technology. Lei Xing, former chief editor at China Auto Review and an independent analyst, remarked that if the 100% tariffs on Chinese-made EVs were a significant barrier, the proposed ban on connected vehicles would be a substantial impediment for Chinese EV manufacturers aiming to enter the US market. According to Xing, the likelihood of Chinese EVs being available in the US in the near future would be “nearly zero” under such a regulation.
