The White House on Monday unveiled a long-awaited proposal to ban Chinese-made smart cars because connected vehicles pose a national security risk. The proposal, which comes amid an escalating trade war, could affect U.S. automakers and suppliers that rely on certain hardware to enable connected car systems.
“This is strategic political theater designed to stop the problem before it fully escalates, while also potentially impacting companies that are currently operating,” Avery Ash, senior vice president of government relations at SAFE, a national security-focused think tank, told TechCrunch.
The Commerce Department's proposed restrictions would not only ban the sale or import of connected cars from China, but would also ban the software and hardware that run connected car systems in the United States.
If adopted, the ruling would give automakers a year to ensure their connected-car software has no ties to China, but Ash said it likely wouldn't be a problem for most manufacturers.
But where the supply chain could be challenged is the hardware ban: Automakers will have four years to remove certain Chinese-made hardware from their connected cars, including on-board sensors, connected control units, Bluetooth, or the antennas and chipsets that allow cars to connect to the internet.
The Commerce Department is considering allowing smaller automakers to apply for exemptions from the ban on a case-by-case basis to minimize unnecessary disruption to the industry.
But U.S.-based self-driving car makers won't face the same hardware restrictions as automakers. The proposed ban would only restrict the use of Chinese software in Level 3 and Level 4 self-driving cars. In both cases, the cars can drive themselves under certain conditions, but Level 3 systems require a human driver to take over when necessary. Self-driving car makers argue that having full control over the software mitigates potential hardware risks.
And of course, the ban will limit Chinese autonomous vehicle companies' ability to test and deploy in the U.S. Previously, several Chinese robotaxi startups, including Nullmax, Pony.ai, and WeRide, had valid testing permits in California, but most saw the escalation and have stopped testing.
WeRide, which was seeking a U.S. IPO at a valuation of $5 billion, suspended its listing plans in August.
Ash said the ruling was necessary to protect national security interests because connected cars, including electric and self-driving cars, collect sensitive data about drivers and passengers. Connected cars also contain cameras and sensors that power self-driving features and can record detailed information about U.S. infrastructure.
The proposed ruling is one of the Biden administration's final major restrictions on Chinese products imported into the U.S. It follows the government's bans on technology from Huawei, ZTE and other major Chinese telecommunications and surveillance camera brands, as well as investigations into Chinese-made cranes at U.S. ports. It also follows the Biden administration's ban on social media app TikTok based on the same national security principles.
The ban expands the Biden administration's decision to quadruple import tariffs on Chinese electric vehicles to 100%, accusing them of Chinese government subsidies that artificially depress the prices of electric vehicles. The tariffs effectively crippled China's electric vehicle industry in the United States before it had a chance to flood the U.S. market with smart, affordable cars.
The European Union is also considering its own tariffs, as it believes its automakers cannot compete with Chinese EV prices.
The Commerce Department's proposed ban could help spur domestic EV manufacturing in the U.S., a key goal of the Biden administration's Inflation Control Act, signed in August 2022. The IRA provides a $7,500 EV tax credit for vehicles assembled in North America and containing key battery materials sourced from the U.S. or a trading partner, among other incentives to promote domestic EV manufacturing and clean energy production.
The proposed ban follows a similar bill introduced in the House of Representatives by Rep. Elissa Slotkin earlier this year. Other provisions that Slotkin pushed for, such as banning Chinese-made connected cars on U.S. military bases and barring the Defense Department from purchasing Chinese-made lidar, were included in the government's annual defense spending bill.
The ban also includes technologies from other countries of concern, such as Russia, but Russia does not currently produce any of the targeted technologies.
The Biden administration is encouraging interested parties to share their input with the Commerce Department as it develops a final rule, expected by the end of the year, a senior administration official told TechCrunch.