A US plan that would further limit Chinese electric vehicles (EVs) with software and hardware curbs may have ramifications beyond the car industry, and could result in retaliation against US businesses in China, some analysts said.
US officials are set to unveil a proposal to ban the use and testing of Chinese and Russian technology and equipment in automated driving and vehicle communications systems, sources noted.
The pending restrictions stem from an investigation that US President Joe Biden launched in March into cybersecurity risks posed by Chinese vehicle software.
Bill Russo, founder and chief executive officer of investment advisory company Automobility, questioned the US strategy, given the proliferation of Chinese software in other consumer products.
“If it’s okay in something other than a car, it’s okay if it’s in a TV set or a smart device, what is the end game here?” he said. “If the goal is to de-risk China software, where do you draw the line?”
Russo added that an outright ban would only dial up existing political tensions between the two superpowers, and be met with reciprocity that will affect US businesses in China.
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In May, the US quadrupled tariffs on Chinese EVs to a punitive 102.5 per cent. Still, politicians including former president Donald Trump and industry figures in the US have expressed increasing concern that Chinese car companies will set up in Mexico to avoid the tariffs.
Tu Le, founder of US-based advisory company Sino Auto Insights, said Washington’s plan will close a major loophole for Chinese EV makers.
He added that Chinese car manufacturers have looked to bypass import tariffs into one of the world’s biggest auto markets without having to unpick a free-trade accord among the US, Mexico and Canada, also known as the North American Free Trade Agreement or USMCA.
“This is the US closing the Mexico back door because if Chinese carmakers decide to build in Mexico, then they could enter via the USMCA and have free rein into the US,” he said.
“The USMCA can stay intact while Chinese vehicles can’t enter the US.”
In response to US concerns, the trade ministers of the three USMCA members agreed in May to “jointly expand their collaboration on issues related to non-market policies and practices of other countries”, showed a July report.
It expressed concern about the actions of Chinese car manufacturers and government subsidies.
“As with other key industrial sectors, the People’s Republic of China is targeting the EV sector for dominance,” it said.
“It uses non-market policies and practices to concentrate production of goods within its borders, which undermines supply chain resilience and robs our workers and market-oriented businesses of the ability to compete fairly.”
China’s car industry is also facing heavy pushback in Europe for flooding the continent with cheap EVs, which Brussels says are heavily subsidised and unfairly distorting the bloc’s auto industry.
Chinese EVs have reshaped how today’s cars engage with drivers and what features they offer. These capabilities have given rise to growing US concerns about data and cybersecurity risks.
There are also purely commercial worries too, with Bloomberg Intelligence estimating connected vehicles will constitute a global market worth about US$750 billion by 2030.
Shares tied to Chinese companies that produce software and hardware for connected vehicles were mixed on Monday (Sep 23), in response to the proposed US rules targeting their technology.
Hong Kong-listed Zhixing Automotive Technology fell as much as 3.1 per cent while in Shenzhen, Longhorn Auto rose as much as 2.1 per cent. BLOOMBERG
