Earlier this week, the Commerce Department proposed a wide-reaching rule to prohibit Chinese-developed software and connectivity-related hardware from cars in the United States, starting in a few years. And since these technologies are relatively ubiquitous in Chinese cars, the rule could amount to a de facto ban on them in the United States. The decision builds on the Biden administration’s recent moves to levy 100 percent tariffs on Chinese-made electric vehicles, and provisions within the Inflation Reduction Act that restrict incentives for electric vehicles that contain components or raw materials made in China.
In order “for consumers to be safe and secure in increasingly connected cars on American roads, we need to guard against national security risks from China,” national economic adviser Lael Brainard argued in a speech to the Detroit Economic Club earlier this week. The ban was proposed to “guard against safety and security risks in connected cars and ensure that our auto supply chains are resilient from foreign threats,” she added, citing Chinese cars’ ability to exchange data with other vehicles, personal devices, infrastructure, and auto manufacturers. “The computer systems that power these cars can control vehicle movement and collect sensitive driver and passenger data, and the cameras and sensors embedded within them can record detailed information about our country and citizens.” Commerce Secretary Gina Raimondo said that while few cars on the road currently contain these Chinese-made technologies, putting up barriers now would allow policymakers to “secure the American people, including our children, from potential surveillance.”
The Biden administration seems to be doubling down on an economic agenda in which the lines between industrial and national security policy are becoming increasingly thin. Pitched on the fear that so-called “connected cars” pose a grave threat, the proposal to ban them also comes as automakers in the U.S. attempt to catch up to Chinese competitors—and as Democrats attempt to secure critical swing state votes in Michigan. As new cars in general become increasingly high-tech, though, there are few protections in place to safeguard consumers’ privacy, wherever their cars are made.
“Basically any new car today is a smart phone with an engine on wheels,” says Tyson Slocum, director of the nonprofit watchdog group Public Citizen’s energy program. “There are issues that need to be addressed through legislation to ensure that consumers have rights and adequate control over their vehicles.” There are some notable differences. Where Teslas rely more heavily on cameras for their self-driving and driver assistance technologies, Chinese firms tend to rely more on advanced sensors, such as lidar.
Many of the features Brainard mentioned, though, are also now commonplace in new models produced in Japan, Germany, and the United States. Electric and gas-powered vehicles alike contain sensors, cameras, screens, and radar that can make modern cars feel more like an iPad on wheels than a sturdy Y2K-era Toyota Camry, for instance. Teslas collect enormous amounts of information on driving behavior and travel history, and—like other new models—allow drivers to lock doors, honk horns, and perform other functions remotely. Just about every car made in the last several years contains an “event data recorder” to capture information on speed, acceleration, steering input, and more in the immediate aftermath of a crash. For now, the language in the proposed rule is broad enough to refer to a potentially wide range of technologies.
While acknowledging some of the benefits of these sorts of technologies, Brainard warned that China’s investments in next-generation automobile tech “could expose the American people to new risks,” including everything from clandestine data collection to power grid disruptions. “Without the appropriate safeguards in place, sensitive data on Americans could be passed to Chinese authorities, or connected vehicles might provide a back door for malicious foreign actors to engage in espionage or sabotage.”
Similar features are already saddling Americans with additional costs and dangers. In 2020, a California woman reported to police that her abusive husband was using features in her 2016 Tesla Model X to track her whereabouts, violating the restraining order she’d taken out against him. She suspected that was the case after finding the metal baseball bat he’d threatened her with in the back seat.
General Motors until recently had a program that involved selling data on buyers’ driving habits to third-party brokers whose reports insurance companies rely on to determine the rates they charged to individual customers. As The New York Times reported earlier this year, a Chevy Bolt driver who’d never been in an accident found that multiple insurance companies were asking sky-high rates based on exhaustive speed, acceleration, and trip-length data collected by his car. In some cases, drivers opt in to so-called “usage-based” programs where they consent to have their driving data collected; in other cases, they don’t. E.V.s and high-end internal combustion engine vehicles can both be extraordinarily difficult to repair given the lack of mechanics able to repair them and the difficulty of finding replacement parts. In some cases, cars need to be reprogrammed in order to be able to accept new modules. Owing to all these factors, insurance companies are increasingly writing off minor damages on smarter, higher-end cars as total losses.
This all means potential new costs and concerns for consumers—and new revenue streams for car companies able to sell data, charge for software updates, and keep third parties from being able to repair their vehicles. So far there’s been little effort to regulate these matters at the federal level or provide consumer protections. Lawmakers have asked the Federal Communications Commission and the Federal Trade Commission to take action, and California regulators initiated a probe last year into how automakers handle the data collected from internet-connected vehicles. Following an investigation into several automakers, Texas Attorney General Ken Paxton sued General Motors last month for selling drivers’ data to insurance companies.
As important as the real dangers posed by smarter cars is the fact that legacy automakers just aren’t quite as good at making them. The Big Three fare a bit better than their competitors in Europe and Japan. The consultancy Gartner’s just-released “digital automaker index”—which ranks carmakers’ digital performance—found that GM and Ford have fallen behind Tesla and Chinese competitors, while remaining ahead of Honda, BMW, and Volkswagen. As U.S. automakers scale back their electrification plans and struggle to profit from E.V.s, lagging behind on software and hardware could add another anxiety to the mix.
Raimondo insisted to The New York Times that the rule was strictly about national security concerns, not about gaining trade or economic advantage. Brainard’s speech in Detroit, though, was fairly explicit about the ban being a means to protect U.S. automakers and their market share. “Some of this is framed as a security issue. But when you see it in line with the tariffs, you can see that this is creating a protected market ideally for parts of the U.S. auto industry to catch up,” said Kyle Chan, a postdoctoral researcher at Princeton University who studies industrial policy. “The rest of the world is not really waiting, though. The U.S. domestic market might be a bit sheltered in the near term, while the rest of the world is just sort of up for grabs.”
