Biden administration sets up strategy to counter Chinese EV dominance

The Biden administration has introduced a new measure that could prove to be its most effective tool yet in combating the influx of affordable Chinese electric vehicles (EVs) that have been reshaping the global automotive landscape. This latest initiative, focusing on banning Chinese connected-car technology, was announced by the U.S. Commerce Department on Monday.

This new prohibition on hardware and software represents a significant escalation in the administration's efforts to protect the U.S. auto industry. It follows previous measures, including the imposition of 100 per centtariffs on Chinese EVs and the denial of a USD7,500 consumer EV subsidy for vehicles containing China-made components.

What sets this new ban apart is its broad reach. Unlike earlier measures, the connected-car tech prohibition would apply to vehicles produced by Chinese firms outside of China, including those manufactured in planned factories in Mexico or Europe. This comprehensive approach has led industry consultant Michael Dunne to describe it as a "powerful statement," suggesting that U.S. officials deemed previous measures insufficient to address the perceived threat.

The proposal has significant implications for Chinese EV manufacturers like BYD, which has announced plans for a factory in Mexico. While BYD has emphasised that this facility would serve only the local market, U.S. trade groups remain apprehensive, warning that Chinese EVs could potentially cause an "extinction-level event" for U.S. automakers.

Beyond traditional EVs, the Biden proposal also targets Chinese software and self-driving cars, effectively creating a trade barrier that could shield U.S. companies like Tesla and other automakers pursuing robotaxi development. This aspect of the ban is particularly noteworthy given Tesla CEO Elon Musk's increasing focus on autonomous technology as a cornerstone of the company's future strategy.

However, analysts caution that this move could provoke retaliatory trade policies from China, potentially putting Tesla's extensive operations in China at risk.

U.S. Commerce Department officials have framed the threat posed by Chinese vehicles and technology as both a national security concern, citing potential espionage risks, and an economic threat. They acknowledge China's leadership in battery and software technology, including systems for in-vehicle driver features, which has been bolstered by substantial government subsidies.

The proposed ban is designed to be implemented gradually:

- Software restrictions would take effect in 2026 for 2027 model-year vehicles.

- Hardware restrictions would begin with the 2030 model year.

The administration aims to finalise these new rules before President Biden's current term ends on January 20, 2025.

China has expressed opposition to what it views as the U.S. "generalisation of the concept of national security and discriminatory practices against Chinese companies and products." Meanwhile, Canada, whose auto industry is closely aligned with the U.S., is reportedly considering a similar ban.

The Biden administration's concerns extend to Chinese autonomous vehicle technology being tested in the United States. Earlier this year, China-based Hesai Group, a producer of lidar systems for autonomous driving, was added to a list of companies allegedly working with Beijing's military, despite the company's denial of these allegations.

White House economic advisor Lael Brainard noted that China had previously imposed its restrictions on Tesla vehicles in China, citing national security concerns, though these restrictions were later lifted.

While national security is a primary justification for the proposed ban, with officials citing concerns about driver privacy and potential remote vehicle control, the administration also acknowledges the economic motivations behind the move, aiming to ensure fair competition for U.S. manufacturers.

The intersection of electric vehicles and trade policy has become a significant theme in the 2024 U.S. presidential campaign, with anti-China measures finding rare bipartisan support. The Biden administration has emphasised its desire for Americans to choose American-made electric vehicles over Chinese alternatives.

However, industry experts highlight the complexity of implementing such a ban, given the prevalence of Chinese technology in many products entering the U.S. market. Determining where to draw the line in this interconnected global supply chain presents a significant challenge for policymakers and industry stakeholders alike.