At this moment, Chinese manufacturers have not entered the U.S. market on their own. But there is a plan in the works by the Biden Administration to prevent them from entering freely in the near future. While China will view the proposal as protectionism, the administration is saying that this plan done under the guise of national security—much like the bans on certain drones, phones, and computers and parts. The proposal will also apply to manufacturers who build and sell vehicles within the U.S. right now.
The major concerns put forth by President Biden’s proposal is related to data collection and manipulation by Chinese state actors. According to Reuters, the Administration has ordered an investigation into just how far and damaging hardware and software could be with vehicles that are connected via mobile WIFI and utilize navigation systems through related hardware and software built by the CCP controlled country. This would also extend to any hardware and software built by U.S. adversaries like Russia, Iran, and other hostile countries. Finally, there will be prohibitions around testing self-driving cars on U.S. roadways by Chinese automakers, as well.
As part of the proposal, bans of Chinese-made hardware and software by automakers who sell and manufacture vehicles within the U.S. starting with the 2027 model year for software while hardware will be banned by model year 2030, or starting by January 2029 for vehicles that do not have a traditional model year. Both bans appear to only cover vehicles legal to use on U.S. roadways such as cars, trucks, SUVs, and commercial vehicles, but off-highway vehicles like agricultural and mining vehicles would not be part of these bans. This would effectively prevent any Chinese automaker from making in-roads to the U.S. market, but Biden’s Commerce Department would allow for “specific authorizations” for exemptions, according to Reuters, without mentioning what those authorizations would be.
White it may point towards protectionism of cheaply made Chinese parts and whole vehicles, according to White House National Security Adviser, Jake Sullivan, in a letter back in March there were state sponsored cyberattacks carried out by China through a group known as Volt Typhoon. These attacks targeted water and wastewater systems within the U.S. and its territories. According to that letter, these attacks were “not consistent with traditional cyber espionage,” it appears the Biden Administration is foreseeing attacks beyond those critical systems and told Reuters that with the 10- to 15-year (or longer, in some cases) lifespan of vehicles, “the risk of disruption and sabotage increases dramatically.”
Currently, both GM and Ford have vehicles made in China that would be potentially impacted by this proposal. The Buick Envision and the Lincoln Nautilus could be banned from being sold in the U.S. if this proposal is approved, but they might fall into the “specific authorizations” mentioned before, though that would add another layer of compliance headache for new vehicles and may dissuade future investment in similar Chinese-based operations. However, Reuters indicated that Liz Cannon, head of the Commerce Department Information and Technology Office, believed these vehicles would no longer be sold in the U.S. under the proposal. We reached out to both Ford and GM for comment and are awaiting responses.
Meanwhile, the Alliance for Automotive Innovation (AAI)—which represents many automakers in the U.S. including GM, Toyota, Volkswagen, and others—and its president, John Bozzella—put out a statement in response to this proposal indicating that they understand the need for such a rule. However, they added that “there’s actually very little technology—hardware or software—in today’s connected vehicle supply chain that enters the U.S. from China.” The AAI pointed out that the 2027 and 2030 model year timelines would be a very difficult for some manufacturers to meet while also finding alternate suppliers. “I’ve said this in other contexts, but it applies here too,” Bozzella stated, “you can’t just flip a switch and change the world’s most complex supply chain overnight. It takes time.”
While the proposed rule has been published, the Commerce Department is looking for additional public comment on the proposal despite the April 30 deadline long past. For those looking to make a comment on this proposed rule, you may visit the eRulemaking Portal searching for docket number BIS-2024-0005 or RIN 0694-AJ56. You may also email your comments to [email protected] with “RIN 0694-AJ56” in the subject line.
