US Proposal to Ban Chinese EV Software, Hardware Protectionism: Analyst

Workers finish assembling an electric vehicle (EV) at Chinese EV startup Leapmotor in Jinhua, east China’s Zhejiang Province, April 1, 2024. The smart EV factory delivered 14,567 new vehicles in March, up 136 percent year-on-year. Photo: VCG

Chinese experts on Sunday criticized reports of a U.S. plan to ban Chinese software and hardware from connected and autonomous vehicles in the U.S., saying the move exposes Washington’s reckless attempts to politicize trade issues and will hurt the global auto industry supply chain, including its own American companies.

The proposal, which is expected to be announced soon, comes after Washington announced high tariffs on Chinese electric vehicles. It is further evidence that the United States is making every effort to stop the development of the Chinese car industry. However, experts note that such actions contradict basic economic laws and will not stop the development of the Chinese car industry.

The U.S. Commerce Department is expected to propose a ban on Chinese software and hardware in connected and autonomous vehicles on U.S. roads over national security concerns, Reuters reported over the weekend, citing two anonymous sources. The proposal is expected to be announced on Monday, Reuters reported.

Specifically, the import and sale of vehicles from China with software or hardware for key communications or automated driving systems will be banned. The U.S. Department of Commerce plans to implement the software ban in the 2027 model year, while the hardware ban will go into effect in January 2029 or the 2030 model year.

Reports of a ban come after Washington recently announced a 100 percent tariff on Chinese electric vehicles in an attempt to clamp down on China’s burgeoning electric vehicle industry. They also come as U.S. officials have stepped up a smear campaign against Chinese electric vehicles and other products, often with fear-mongering rhetoric.

In May, Commerce Secretary Gina Raimondo even suggested that cars with Chinese software or hardware could be disabled. “You can imagine the most catastrophic outcome theoretically, if there were a few million cars on the road and the software was disabled,” she said.

Experts say the series of crackdowns has underscored Washington’s concerns about the rapid expansion of China’s auto industry in recent years and its determination to resort to costly protectionist measures to curb its growth.

“In fact, by announcing additional tariffs and other repressive measures, the U.S. has made it clear that it has fallen behind China in the new-energy vehicle sector,” Lü Xiang, a researcher at the Chinese Academy of Social Sciences, told the Global Times on Sunday. “It has lost the competition, so it is resorting to protectionist measures.”

According to Reuters, relatively few light-duty vehicles made in China are exported to the U.S. When it comes to software, including autonomous driving technology, some Chinese companies have been allowed to conduct tests in the U.S.; however, there are no public reports of major sales to the U.S.

“In the long term, this means that Chinese companies will lose a large market if the U.S. imposes a ban; however, the ban will also result in losses for American companies and consumers,” Xiang Ligang, CEO of the Beijing-based Information Consumption Alliance, told the Global Times on Sunday.

Xiang said that like the U.S. ban on sales of Chinese telecommunications equipment and the crackdown on other Chinese products, the proposed ban on Chinese software and automotive hardware would also lead to higher costs for American companies and consumers.

It is worth noting that the US government’s actions to restrict the Chinese auto industry have sparked fierce opposition from the auto industry in the US and other countries.

Reuters reported that a trade group representing major carmakers including General Motors, Toyota, Volkswagen and Hyundai warned that changing the hardware and software would be difficult and time-consuming.

Additional tariffs on Chinese electric vehicles have also drawn criticism from U.S. companies, forcing the U.S. government to delay announcing a final decision twice. U.S. EV makers and other companies have requested that the higher tariffs be lowered, delayed or abandoned, and that potential exemptions be significantly expanded, Reuters reported.

However, the US government has repeatedly ignored the requests of business communities, exposing the political motives behind such actions, which, although they will cause huge damage to related industries, will not lead to achieving the US goal, experts say.

“It is becoming increasingly obvious that the U.S. protectionist industrial policy has failed, and more protectionism will lead to an even greater failure,” Lü said, adding that there is huge scope for cooperation in the auto industry if the U.S. stops politicizing trade and economic issues.