US car-tech ban is a new weapon against Chinese EVs

The Biden administration’s proposed ban on Chinese connected-car technology could prove its strongest weapon yet to fend off an onslaught of cheap Chinese electric vehicles (EVs) that has upended the global car industry.

The ban on hardware and software, announced on Monday by the US commerce department, is the administration’s latest salvo after imposing 100% tariffs on Chinese EVs and denying a $7,500 (R129,897) consumer EV subsidy to any vehicle with made in Chinese components.

Unlike those measures, the connected-car tech prohibition would apply even to cars built by Chinese firms outside China — such as in Mexico or Europe, where they are planning factories.

“It’s a powerful statement,” said Michael Dunne, a consultant who follows the Chinese car industry. After imposing high tariffs US officials “looked at it again and said: ‘Is that going to be enough?’ And they concluded — ‘probably not’.”

Chinese EV leader BYD has said it planned a Mexico plant. While it has emphasised the factory would only serve the local market, US trade groups are wary, saying Chinese EVs could cause an “extinction-level event” for US carmakers.

Biden’s proposal also calls for barring Chinese software or self-driving cars from testing or deployment, effectively creating a trade barrier that could protect US EV pioneer Tesla and other carmakers seeking to develop robotaxis, analysts said. Tesla’s Elon Musk has in 2024 increasingly staked the company’s future on autonomous technology, another sector where it faces stiff Chinese competition.

Analysts warn of China trade-policy retaliation, which could target Tesla’s sprawling China operations. Tesla did not respond to a request for comment.

Biden administration officials on Monday cast the threat of Chinese vehicles and technology as a national security threat that could enable espionage and an economic threat. China’s heavily subsidised EV sector has been a leader in battery and software technology, including systems for in-dash driver features.

Few Chinese-made vehicles are sold in the US — and none from Chinese brands. Monday's action aims to keep it that way by closing loopholes, US commerce officials said.

“If we had just said, ‘No Chinese vehicles’, we would have been leaving a door open for China to come in via automotive software,” said Liz Cannon, who heads the department’s information and communications technology office.

The Biden plan would prohibit software in 2026, for 2027 model vehicles, and hardware for the 2030 model year. The administration hopes to finalise the new rules before Biden leaves office on January 20.

Chinese officials warned before Monday’s announcement they would defend the nation’s interests.

“China opposes the US generalisation of the concept of national security and discriminatory practices against Chinese companies and products,” said China’s foreign ministry spokesperson Lin Jian.

China’s foreign ministry declined to comment further on Monday.

US legislators have expressed security concerns about Chinese autonomous vehicle technology being tested in the US.

Earlier this year, the Biden administration added China-based Hesai Group — whose lidars help autonomous driving systems create three-dimensional road maps — to a list of companies allegedly working with Beijing's military. Hesai, whose customers include robotaxi firms including General Motors’ Cruise and Amazon’s Zoox, denied the allegations and sued the government.

On Monday, White House economic adviser Lael Brainard noted China fired the first shot in the brewing trade war by limiting where Tesla vehicles, with their cameras, can drive in China, citing national security concerns. Those restrictions were removed earlier this year after China’s officials found Tesla’s data collection complied with its regulations.

The Biden administration officials raised national security concerns in proposing the car-tech ban, citing fears that drivers’ privacy could be invaded or their vehicles could be remotely controlled from abroad, but they also acknowledged seeking to protect the economic security of US carmakers.

“We also are focused on the competition aspect and making sure our manufacturers can compete fairly,” Brainard said.

The White House said it has ample evidence of China malware in critical American infrastructure but did not provide evidence China is using vehicles to spy.

EVs and trade policy have been major themes of the 2024 US presidential campaign, with anti-China measures being a rare point of bipartisan agreement.

Republican presidential nominee Donald Trump has suggested China could dominate car production and railed against Biden’s policies to promote EVs. On Monday, Brainard said Biden did not want Chinese vehicles flooding the US market.

“When Americans choose EVs we want to make sure they choose an American vehicle — not a Chinese vehicle,” she said.

Democrat Kamala Harris’ campaign did not comment.

“There’s Chinese tech in so many products that come into the US,” said Sam Fiorani, vice-president at research firm AutoForecast Solutions. “Figuring out where you draw that line is going to be difficult.”

Reuters