Exclusive-US to propose ban on Chinese software and hardware in connected vehicles, sources say

By David Shepardson

WASHINGTON (Reuters) – The U.S. Commerce Department is expected on Monday to propose banning Chinese software and hardware in connected and autonomous vehicles on U.S. roads due to national security concerns, two sources told Reuters.

The Biden administration has expressed serious concerns about Chinese companies’ collection of data on US drivers and infrastructure, as well as potential foreign manipulation of internet-connected vehicles and navigation systems.

The proposed regulation would ban the import and sale of vehicles from China with key communications or self-driving system software or hardware, said the two sources, who declined to be identified because the decision has not been made public.

The move represents a significant escalation of existing US restrictions on Chinese vehicles, software and components. Last week, the Biden administration blocked steep tariff hikes on Chinese imports, including a 100 percent tax on electric vehicles, as well as new increases on EV batteries and key minerals.

Commerce Secretary Gina Raimondo said in May that the risks of Chinese software or hardware in US connected vehicles are significant.

“You can imagine the most theoretically catastrophic outcome if you had a few million cars on the road and the software was disabled,” she said.

President Joe Biden in February ordered an investigation into whether Chinese vehicle imports pose national security risks to connected car technology — and whether that software and hardware should be banned from all vehicles on U.S. roads.

“China’s policies could flood our market with its vehicles, posing risks to our national security,” Biden said earlier. “I won’t let that happen on my watch.”

The Commerce Department plans to give the public 30 days to comment before any finalization of the rules, the sources said. Almost all newer vehicles on US roads are considered “connected”. Such vehicles have onboard networking hardware that allows them to access the Internet, allowing them to share data with devices both inside and outside the vehicle.

The department also plans to propose the software bans go into effect in the 2027 model year, and the hardware ban would go into effect in January 2029 or the 2030 model year. The bans in question would include vehicles with certain features bluetooth, satellite and wireless, as well as highly autonomous vehicles that could operate without a driver behind the wheel.

A bipartisan group of US lawmakers raised the alarm in November about Chinese auto and technology companies collecting and manipulating sensitive data while testing self-driving vehicles in the United States.

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The bans would also extend to other US foreign adversaries, including Russia, the sources said.

A trade group representing major automakers, including General Motors, Toyota Motor, Volkswagen, Hyundai and others, warned that changing hardware and software would take time.

The automakers noted that their systems “undergo extensive pre-production engineering, testing and validation processes and generally cannot be easily interchanged with systems or components from another supplier.”

The Commerce Department declined to comment Saturday. Reuters first reported in early August details of a plan that would have the effect of banning Chinese automakers from testing autonomous vehicles on US roads. There are relatively few Chinese-made light vehicles imported into the United States.

The White House approved the final proposal on Thursday, according to a government website. The rule aims to ensure the security of the supply chain for connected vehicles in the US. It will apply to all vehicles on U.S. roads, but not agricultural or mining vehicles, the sources said.

Biden noted that most cars are connected like smartphones on wheels, linked to phones, navigation systems, critical infrastructure and the companies that made them.

(Reporting by David Shepardson in Washington; Editing by Lananh Nguyen, Paul Simao and Matthew Lewis)