The U.S. Department of Commerce proposed on Monday (September 23) to prohibit the use of Chinese software and hardware in networked vehicles on American roads, citing national security concerns. This move effectively bars nearly all Chinese automobiles from entering the U.S. market.
The regulation also suggests that the U.S. and other major auto manufacturers remove Chinese key software and hardware from American vehicles in the coming years.
The Biden administration has expressed serious concerns about Chinese companies collecting data on American drivers and infrastructure through networked vehicles, as well as the potential for foreign manipulation of vehicles connected to the internet and navigation systems. In February, the White House ordered an investigation into potential risks.
These restrictions will prevent Chinese car manufacturers from testing autonomous vehicles on U.S. roads and extend to include software and hardware produced by other foreign adversaries, including Russia.
According to a communication issued by the White House on Monday, “The Department of Commerce has determined that certain technologies used in networked vehicles from China and Russia pose particular serious threats. These concerning nations may exploit critical technologies in our supply chain for surveillance and disruption to undermine national security.”
The Department of Commerce found that the increasing connectivity of vehicles creates opportunities for collecting and utilizing sensitive information. “Certain hardware and software in networked vehicles can capture information about geographical regions or critical infrastructure, providing opportunities for malicious actors to disrupt infrastructure or vehicle operations,” the White House stated.
This action represents a significant escalation in U.S. restrictions on Chinese automobiles, software, and components. Earlier this month, the Biden administration imposed steep tariffs on Chinese imports, including a 100% tariff on electric vehicles, as well as increased tariffs on electric vehicle batteries and critical minerals.
Commerce Secretary Gina Raimondo stated in a press briefing on Monday, “When a foreign adversary develops software to manufacture vehicles, it means it can be used for surveillance, for remote control, threatening the privacy and safety of Americans on the road.”
“In extreme cases, foreign adversaries could simultaneously shut down or control all their vehicles operating in the U.S., causing collisions, blocking roads,” she added.
She mentioned Europe as a “cautionary tale.” After opening up the electric vehicle market, Chinese-produced cars quickly flooded into Europe.
The number of Chinese-made small cars or trucks imported into the U.S. is relatively small.
Raimondo said the department is taking action, stating, “…we will not wait until our roads are filled with vehicles and the risk becomes significant before taking action.”
The Department of Commerce conducted a seven-month investigation into the risks posed by networked vehicles, finding a range of threats as vehicles become more closely connected to critical infrastructure, including charging stations, smart roads, and cities.
Nearly all new small cars and trucks in recent years are “networked,” with onboard network hardware allowing access to the internet for data sharing with both internal and external devices.
A senior U.S. government official confirmed that the proposal would effectively ban all existing Chinese small cars and trucks from entering the U.S. market, but added that it would allow Chinese auto manufacturers to seek “specific authorization” for exemptions.
The provision states that companies may seek some exemptions if they can demonstrate they are implementing mitigation measures such as audits or on-site inspections.
“Our current assumption is that Chinese vehicles will fall within the scope of the ban,” the senior official said.
The Chinese Embassy in Washington criticized the U.S. plan to restrict Chinese automobile exports to the U.S. in August.
The White House’s proposal calls for the software ban to take effect starting from the 2027 model year, while the hardware ban will take effect in the 2030 model year or January 2029.
The Department of Commerce has given the public 30 days to comment on the proposal and aims to finalize it before January 20, 2025. These rules will apply to all road vehicles but not to agricultural or mining vehicles not used on public roads.
The Alliance for Automotive Innovation warned that changing hardware and software takes time. The organization represents major auto manufacturers such as General Motors, Toyota, Volkswagen, and Hyundai.
The organization noted that networked car hardware and software are being developed worldwide, including in China, without specifying the extent of Chinese-made components in U.S. models.
Officials stated that phasing out Chinese and Russian software is relatively straightforward due to the low volume, but hardware will pose a larger challenge.
“The hardware supply chain for these systems is slightly more complicated, with more Chinese hardware,” a senior U.S. official said, “During this period… there is an emphasis on shifting the supply chain to other suppliers.”
Officials outlined a range of threats that could pose risks to American consumers, such as data collection on driver residence, school drop-offs, or medical visits.
White House National Security Advisor Jake Sullivan stated in the same briefing that there is ample evidence showing Beijing has pre-deployed malicious software in critical U.S. infrastructure.
Sullivan said, “There could be millions of vehicles on the road, with an average lifespan of 10 to 15 years, which sharply increases the risk of disruption and sabotage.”
Officials stated that the Department of Commerce is evaluating other industries that may wish to take similar actions, such as drones or cloud infrastructure.