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Proposed US rule could force major automakers to halt Chinese-made vehicle imports

Proposed US rule could force major automakers to halt Chinese-made vehicle imports

US rule could force major automakers to halt Chinese-made vehicle imports

The United States Commerce Department is considering a new rule that would effectively prohibit major automakers from importing vehicles manufactured in China. This regulation, aimed at cracking down on Chinese software and hardware, could have far-reaching consequences for companies such as General Motors (GM) and Ford Motor Company, as well as other automakers operating in the US market.

Liz Cannon, head of the Commerce Department's information and communications technology office, revealed in a media interview on Monday that the proposed rule would require GM and Ford to cease importing vehicles they currently produce in China for the US market. "We anticipate at this point that any vehicle that is manufactured in China and sold in the U.S. would fall within the prohibitions," Cannon stated.

The impact of this rule could be substantial for both companies. GM currently sells the Buick Envision in the US market, while Ford markets the Lincoln Nautilus, both of which are assembled in China. In the first half of 2024, GM sold approximately 22,000 Envision SUVs, while Ford moved 17,500 Nautilus vehicles in the US. Cannon emphasised that both companies are aware that "going forward," production for the US market "would need to be shut down in China and moved elsewhere."

The proposed regulation would not be limited to American automakers. Other companies selling or manufacturing vehicles in the US, such as Volvo Cars and BYD, could also be affected. BYD North America, a subsidiary of Chinese automaker BYD, which produces electric buses in Lancaster, California, may need to reassess its operations. "We will have to work with them to better understand their supply chain," Cannon explained. "They will have to come in for a specific authorisation."

The Commerce Department has indicated that it would allow companies to seek "specific authorisation" to continue sales of vehicles or components. This provision could provide a pathway for affected automakers to maintain their operations, albeit under increased scrutiny.

The rule's implementation would likely have nuanced effects on software development. For instance, software developed by Chinese employees in China for a Chinese automaker would probably be prohibited. However, software created by Chinese employees working in another country for a non-Chinese company might be permitted.

This development follows a Reuters report from May, which identified four Chinese vehicle models currently sold in the US market, including the Polestar 2 and Volvo's S90 sedans. Both Polestar and Volvo are affiliates of Chinese automaker Geely. Cannon expressed openness to working with companies like Volvo to explore risk mitigation strategies and potentially grant authorisations.

In response to the proposed rule, GM refrained from directly addressing whether it would need to halt sales of the Envision. Instead, the company acknowledged that the "government has an important role to set clear policies" on security issues. Ford, on the other hand, has not yet commented on the matter.

Volvo Cars issued a statement saying, "We are reviewing the proposal from the U.S. Commerce Department and are analysing any potential impact it might have on us and the auto industry in the U.S."

The proposed rule underscores the growing tensions between the United States and China in the technology and automotive sectors. It reflects broader concerns about national security and the increasing integration of advanced technologies in modern vehicles.

As the automotive industry continues to evolve with the rise of electric and autonomous vehicles, the role of software and hardware becomes increasingly critical. This proposed regulation highlights the complex interplay between international trade, national security, and technological advancement in the global automotive market.

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