Federal Government to Impose Restrictions on Chinese Vehicle Software

People look at a BYD Seagull car by Chinese electric vehicle manufacturer BYD Auto at the Bangkok International Motor Show in Nonthaburi, Thailand, on March 27, 2024. (Lillian Suwanrumpha/AFP via Getty Images)

The Commerce Department plans to issue proposed rules on Chinese-made internet-connected vehicles in August, and some car software will face restrictions from the regulations, according to a senior official.

“We’re looking at a few components and some software, not the whole car, but it would be some of the key driver components of the vehicle that manage the software and manage the data around that car that would have to be made in an allied country,” Alan Estevez, undersecretary of Commerce for Industry and Security, said at “The China Challenge” forum in Colorado on July 16.

“A modern car has a lot of software in it. It’s taking lots of pictures. It has a drive system. It’s connected to your phone. It knows who you call. It knows where you go. It knows a lot about you,” he said.

Connected cars have onboard integrated network hardware that allows internet access and data sharing with devices both inside and outside the vehicle.

Mr. Estevez’s comments are the latest since the Commerce Department’s action in May, when it issued an advance notice of proposed rulemaking to investigate the national security risks of connected vehicles with China-manufactured technology in the United States.

“It doesn’t take a lot of imagination to think of how [a] foreign government with access to connected vehicles could pose a serious risk to both our national security and the personal privacy of U.S. citizens,” Secretary of Commerce Gina Raimondo said at the time.

“We need to understand the extent of the technology in these cars that can capture wide swaths of data or remotely disable or manipulate connected vehicles.”

The investigation followed direction from President Joe Biden in February, when he criticized the Chinese communist regime’s trade practice of flooding the U.S. market with its vehicles, posing a national security risk to the United States.

“Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China,” President Biden said in a statement. “These vehicles could be remotely accessed or disabled.”

In May, the federal government announced that it quadrupled tariffs on Chinese imported electric vehicles (EVs) to 100 percent from 25 percent. Imported Chinese steel and aluminum products, lithium-ion batteries, and solar cells also face significant tariff increases.

In last year’s fourth quarter, Chinese automaker BYD overtook Tesla as the world’s largest EV maker, selling more than 500,000 EVs worldwide. BYD also sold over 3 million cars in 2023, nearly twice as high as the previous year.

At the hearing in May before the Senate Appropriations Subcommittee on Commerce, Justice, Science, and Related Agencies, Ms. Raimondo discussed the potential national security risks posed by Chinese vehicles.

Ms. Raimondo said connected vehicles “have thousands of sensors, thousands of chips—they’re controlled by software, which is coming from Beijing in the case of Chinese-made cars. They know where the driver goes, what the driving patterns are, [and] what you’re saying in your car. It’s a lot of data around U.S. persons that goes right back to Beijing.”

During the hearing, she said her department was tracking public reports that Chinese automakers planned to assemble vehicles in Mexico, and she wanted to ensure they couldn’t avoid new U.S. tariffs.

Early this year, the Alliance for American Manufacturing warned in its report that Chinese EV dominance could wipe out the century-old U.S. auto industry.

“The introduction of cheap Chinese autos–which are so inexpensive because they are backed with the power and funding of the Chinese government–to the American market could end up being an extinction-level event for the U.S. auto sector, whose centrality in the national economy is unimpeachable,” the report reads.

The group recommended that Washington implement trade measures to prevent an influx of subsidized Chinese EVs from Mexico with lower tariffs, as Beijing could exploit free trade agreements between Washington and its neighboring trading partner.

Sen. Marco Rubio (R-Fla.), one of the Senate’s most vocal critics of the Chinese regime, has proposed multiple measures to counter subsidized Chinese-made cars in the U.S. market and help the American auto industry.

In March, the senator introduced three bills to protect the American auto industry from the regime’s unfair trade practices. These include the Closing Auto Tariffs Loopholes Act, the Strengthening Tariffs on Chinese Autos Act, and the American Subsidies for American Autos Act.

Reuters contributed to this report.