Foreign Spy Cars? The US Government Is Not Playing with Robotaxes.

Some Chinese automakers are betting big on autonomous vehicle technology to develop robot taxis. But the U.S. government is set to shut down Chinese autonomous vehicle testing in the U.S. market over national security concerns. Here are the details and why it’s a big deal.

Go all out

China seems to be stepping on the gas when it comes to developing autonomous vehicles. That makes sense, considering China accounted for nearly 62% of the 10.4 million battery electric vehicles (EVs) produced globally in 2023; EVs are more easily adapted to autonomous technology. By comparison, the United States came in second with just 1 million, according to GlobalData.

Chinese companies are already experimenting intensively with autonomous driving technology in their domestic market and plan to continue this research abroad. Baidu operates a fleet of 500 robotaxis, often without safety drivers, for emergencies in Wuhan, China. The company notes it plans to add another 1,000 vehicles. Sixteen or more Chinese cities have allowed Chinese companies to test self-driving technology on public roads as their industry tries to seize control of the global leadership in autonomous vehicles.

Here’s the catch, and perhaps part of the reason the U.S. government is about to step in. Chinese companies have set up research centers in the U.S. and Europe and are sending data and research to a country where they are not allowed to leave.

US response

The U.S. Department of Commerce is expected to propose a policy in August that would block Chinese software in autonomous and connected vehicles. More specifically, the Biden administration wants to propose a policy that would block Chinese software in U.S. vehicles that have Level 3 or higher automation, as well as vehicles with advanced wireless communication capabilities developed in China.

In the 12 months to November 2022, Chinese autonomous vehicles drove more than 450,000 miles of autonomous vehicle technology testing in California, raising concerns about connected vehicles that use driver monitoring systems to eavesdrop, record or potentially control the vehicle.

“The threats to national security are quite significant,” Commerce Secretary Gina Raimondo said in May, according to Car news“We decided to take action because this is a really serious matter.”

Why is it important?

For investors, the long-term implications could be huge. Potential U.S. government policies could slow China’s ambitions in autonomous technology, especially for automakers like Niowhich announced navigation on pilot (NOP) and autonomous driving as a service (AdaaS) for its ET7 sedan. The policy could certainly also hamper the growth plans of China’s auto industry BYDwhich has just announced a deal with Uber Technologies introduce 100,000 electric vehicles into the company’s fleet.

U.S. companies that could benefit from the potential policy include: Tesla (TSLA 0.58%), General Motors (NYSE: CEO)AND AlphabetWaymo. While Ford Motor Company AND Volkswagen By throwing in the towel on developing autonomous vehicle technology, Tesla could rebound from its delayed robotaxi reveal, now in October, with less competition. It would also give General Motors more time to rebound from the shutdown of Cruise operations.

Ultimately, it will become increasingly important for investors to watch the series of U.S.-China automotive events as well-built, very affordable, and also heavily subsidized Chinese electric vehicles try to enter the U.S. market with or without autonomous technology. The U.S. government is stepping in now because allowing it now could cripple U.S. electric and autonomous vehicle development in the near future — and that would be bad news for many investors.