Washington — The Biden-Harris administration introduced a draft regulation Monday that would ban automakers in the United States from selling vehicles with important components and software from China and Russia.
Lael Brainard, a top voice in the administration as director of the National Economic Council, visited Detroit to promote the new regulation and tout economic policies regarding China and the auto industry — crucial topics for voters in battleground, auto-heavy Michigan ahead of the November election.
“We are taking tough, targeted action to protect our auto sector from security risks and to ensure China does not unfairly undercut our auto sector,” she said to a crowd of business leaders during an appearance at the Detroit Economic Club.
“Cars today have cameras, microphones, GPS tracking, and other technologies connected to the internet. It doesn’t take much imagination to understand how a foreign adversary with access to this information could pose a serious risk to both our national security and the privacy of U.S. citizens,” said U.S. Department of Commerce Secretary Gina Raimondo in a statement.
The proposed ban comes as fears grow over China becoming a dominant player in the global automotive industry and Democrats and Republicans seek to appear tough on China ahead of the 2024 presidential election. The draft rules are intended to proactively protect U.S. national security as Chinese automotive technology makes its way into more vehicles around the world, even models from non-Chinese brands.
It follows a Commerce Department probe launched in February into the national security risks of internet-connected vehicle technology from China.
Look back: Biden administration to investigate internet-connected Chinese vehicles (Feb. 2024)
The campaign for Democratic presidential nominee Kamala Harris declined to comment on the draft rule, though the vice president did comment on another announcement Monday that the U.S. Treasury Department was awarding $9.1 million to the Michigan Economic Development Corp. to help small auto manufacturers and suppliers in the state expand their businesses.
“Investing in the ambitions and aspirations of our people is the best way to grow the American economy and the middle class,” Harris said in a press release. “Yet for far too long, we have seen lack of investment in communities across America and profound obstacles to economic opportunity—including in communities with historic manufacturing expertise such as Detroit.”
She added that the money would build on past actions by the administration by “strengthening our economy overall by investing in historically underserved communities, and keeping more auto jobs in Detroit.”
The campaign for Republican presidential nominee Donald Trump, focused on the proposed Chinese vehicle technology ban, bashed the move.
“The Harris-Biden administration has repeatedly caved to the Chinese Communist Party (CCP),” Trump’s Michigan Communications Director Victoria LaCivita said in a statement to The Detroit News. “This is no more than a disingenuous attempt to cover for Harris’ disastrous record of subsidizing China rather than putting Michiganders first.”
The proposed restrictions, according to Raimondo, will prevent China from harvesting personal data collected by consumer vehicles or — warning of a potential “extreme situation” — taking remote control of vehicles and wreaking havoc on U.S. soil.
“The good news is right now, we don’t have many Chinese or Russian cars on our roads,” the Commerce secretary added in a press briefing about the proposed restrictions. “But we’ve seen Europe is a cautionary tale. In Europe and elsewhere in the world, they went from very few Chinese cars to many, very quickly … so we’re not going to wait until our roads are filled with cars and the risk is extremely significant.”
“We’ve already seen ample evidence of (China) pre-positioning malware on our critical infrastructure for the purpose of disruption and sabotage, and with potentially millions of vehicles on the road, each with 10- to 15-year lifespans, the risk of disruption and sabotage increases dramatically,” said National Security Adviser Jake Sullivan.
The rule, if adopted, would place restrictions on software beginning in model year 2027. Restrictions on hardware would take effect for model year 2030, or Jan. 1, 2029, for units without a model year.
Senior Biden administration officials explained that they crafted the rule, including those timelines, after extensive feedback from businesses across the U.S. automotive supply chain. They found that software from China and Russia was uncommon enough to allow for a quicker timeline, but it will take more time for the industry to cut its use of hardware from the rival nations.
“Important context: there’s actually very little technology – hardware or software – in today’s connected vehicle supply chain that enters the U.S. from China,” said John Bozzella, president and CEO of the Alliance for Automotive Innovation, which represents major U.S. automakers except for Tesla Inc.. “But this rule will require auto manufacturers in some cases to find alternate suppliers.”
That, he said, could be challenging for some companies to accomplish as quickly as the government wants: “The lead time included in the proposed rule will allow some auto manufacturers to make the required transition but may be too short for others.
Look back: Biden administration plans further Chinese auto restrictions, industry urges caution (May 2024)
Raimondo emphasized that the draft rule, which comes from Commerce’s Bureau of Industry and Security, is “not about trade or economic advantage.”
“This is a strictly national security action. We are focused on the national security threat — very real threat that connected vehicles pose to our country and the American people,” she said, perhaps a nod to some industry experts suggesting otherwise.
But Brainard addressed some of the economic aspects of the rule ahead of its release. “We can’t allow for a situation where our auto supply chains are dependent on China,” she said during the press briefing.
She also touted some of the administration’s economic policies regarding China and the auto industry.
“That’s why we put in a 100% tariff on electric vehicles from China,” Brainard said. “And in the Inflation Reduction Act, we tied the $7,500 tax credit for (electric vehicle) purchases to final sourcing in North America. President (Joe) Biden and Vice President Harris will continue to stand with us, auto workers and automakers as they compete and win in the future.”
Brainard told the Detroit Economic Club crowd that Biden and Harris want to provide consumers with options on what powertrains their vehicles have.
“They want American consumers to have the choice on whatever kind of car they want to drive, whether it be an electrified vehicle, a hybrid, a gas-powered, but when Americans do choose electric vehicles, we want to make sure that they choose an American vehicle, not a Chinese vehicle,” she said.
Brainard said the administration is in conversations with officials in Mexico who share concerns about Chinese automakers using the country to ship products to the U.S. with lower tariffs.
“All three North American countries have an interest in ensuring that there’s fair competition, and you cannot compete fairly with a country that has engaged in this much forced technology transfer, IP theft and regulations and barriers that really are intended to favor unfairly underpriced cars from China,” Brainard said.
For Chinese auto companies to set up shop in the U.S. — something former President Trump has said on several occasions he is open to — there will have to be “a set of safeguards that we are putting in place now before we confront these problems,” Brainard said.
Michael Dunne, founder and CEO of Dunne Insights LLC and a former GM executive with experience in Asia, said the situation with Chinese autos is unlike anything the U.S. has seen before.
While consumers have become accustomed to having access to “the very best products in the world at the right prices,” now the country is “stepping firmly into new territory, a new era, and that’s why the Department of Commerce is taking these steps. Do not think that this is a repeat of Japan and Korea before us. It’s a different ballgame,” he said, referencing the two countries’ successful 20th-century expansions into the U.S. market.
With China, there’s a higher security risk with its bigger industry, market and more advanced technology. The U.S. had leverage over Japan and Korea because they needed access to the market here.
“China doesn’t need us,” Dunne said. “We have an adversary competitor, the likes of which we never experienced before in 100 years.”
Democratic members of the Michigan congressional delegation praised the rule Monday.
“As our vehicles become smarter, safer, and increasingly connected, it’s important we’re taking action to mitigate security risks, especially when this technology is coming from countries of concern, like China and Russia,” U.S. Rep. Debbie Dingell of Ann Arbor said in a statement. “An investigation by the Department of Commerce concluded that technology from these adversarial countries poses a real risk both to consumers and to American infrastructure.”
“We simply cannot allow technologies controlled by foreign entities of concern on our roads that are capable of storing and sharing Americans’ personal data, committing espionage, and even manipulating our cars,” U.S. Sen. Gary Peters of Bloomfield Township said in a statement.
He added: “Vehicle technologies made by Chinese Communist Party-backed companies, assisted by China’s unfair trade practices, also present a real threat to U.S. economic competitiveness, intellectual property, and automotive manufacturing. This rule would help improve the security of the U.S. automotive supply chain and keep Michigan at the forefront of global mobility innovation and the creation of more good-paying, union jobs here at home.”
Republican U.S. Rep. John Moolenar of Caledonia called the proposal inadequate.
“While the administration has concluded Chinese auto components and software are a national security threat, Biden and Harris must now stop their giveaway of taxpayer dollars to CCP-affiliated companies,” said Moolenaar, who serves as chairman of the House Select Committee on the Chinese Communist Party.
“While Biden and Harris talk tough on China, their EV rules play into the hands of the CCP, and make our auto industry dependent on supply chains controlled by China,” he added in a statement.
China is the world leader across the EV supply chain, including critical minerals mining and processing, battery manufacturing and finished vehicle production, though the Biden-Harris administration has directed billions of dollars toward the domestic auto industry to catch up.
More: Michigan getting $355 million for EV battery projects in these communities
Nazak Nikakhtar, an international trade official for the Commerce Department during the Trump administration, said ahead of the rule’s release that she expected it would be easy for U.S. automakers to comply with the restrictions. She also predicted it wouldn’t affect vehicle prices because most companies already have internal compliance teams.
“At the end of the day, it doesn’t change the landscape and the autos market,” she told The News.
Nikakhtar added that to more thoroughly address the economic and security threats the Chinese auto industry poses to the U.S. and its allies, the U.S. needs more multilateral cooperation and coordinated efforts between countries.
Sullivan suggested the same.
“A number of our allies and partners share these concerns. Just a couple of months ago, we convened over a dozen countries from across the Indo-Pacific, Europe and North America here in Washington to discuss these national security risks. Many of our partners noted that they are contemplating taking their own measures to mitigate these risks,” he said.
Scott Paul, president of the Alliance for American Manufacturing, celebrated the rule but also said more work must be done.
“Commerce’s proposed prohibition will be a key strategy in securing our data and our automotive sector in the United States, but it’s only a first step in addressing the tidal wave of Chinese autos that will swath the globe,” he said in a statement. “Truly grappling with the economic and national security threats posed by Chinese vehicles requires a holistic approach.”
There will be a 30-day window for public comments on the draft rule, which senior officials said they hope to finalize before Biden leaves office in January.
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