On 23 September 2024, the Biden-Harris administration announced significant steps to strengthen the US automotive industry against the influence of so-called ‘Countries of Concern’. More specifically, this refers to threats to U.S. national security in the area of connected vehicles. In a world where connected vehicle technologies play an increasingly important role, the security of automotive supply chains is considered crucial. Dependence on foreign technologies in the areas of Automated Driving Systems (ADS) and Vehicle Connectivity Systems (VCS) is presented as a significant risk to national security. What does this mean in practice?
Felix Roth
Specifically, the new regulation aims to prevent the import and distribution of vehicles and components from countries such as China and Russia, which are considered ‘Countries of Concern’ by the US. This raises the question of what specific impact this will have on automotive engineering and connected vehicle systems.
The new regulations in detail
The proposed measures cover both the software and hardware of connected vehicles. In particular, they focus on technologies that allow vehicles to connect to external networks, such as Bluetooth, cellular, satellite and WiFi. Systems supporting highly autonomous driving functions will also be considered. Vehicles that use such technologies and have a connection to China or Russia could be banned from the US market for software components from model year 2027 and for hardware components from 2030.
Technological and economic challenges
This has serious implications for vehicle manufacturers and their suppliers in terms of existing supply chains and technologies. A large number of highly specialised components, particularly in the area of ADS and VCS systems, are closely linked to Chinese suppliers. Finding a suitable alternative that is competitive in terms of both quality and price is a major challenge for companies.
In contrast to software components, for which there is only a one-year transition period, a four-year period has been set for hardware. This reflects the fact that hardware supply chains are more intertwined with China, making it more difficult to switch to alternative sources. As a result, many industry players are questioning the extent to which they need to take steps now to consider alternative suppliers or in-house production to meet the new requirements on time.
Unclear definitions: What does ‘Made in China’ mean?
One of the biggest difficulties with the new regulatory measures is that definitions are (still) imprecise. The question arises as to what exactly is meant by the term “Made in China”.
In this context, the question arises whether the regulation also applies to companies employing Chinese staff in EU countries or, for example, to Chinese companies manufacturing in Germany.
These ambiguities need to be clarified as a matter of urgency to ensure legal certainty and planning certainty for the companies concerned.
It is already clear that affected OEMs and suppliers will need to work closely with regulators and the US government to ensure that their technologies are not inadvertently covered by the new requirements.
There could also be significant additional costs, as alternative suppliers tend to have higher costs than Chinese suppliers. This could have an impact on overall development costs and vehicle prices.
Opportunities for the automotive industry?
Although the new regulation is fraught with difficulties, it does open up new opportunities. Shifting to alternative suppliers, possibly domestic or EU-based, could not only reduce dependence on foreign technologies, but also strengthen innovation within their own supply chains. Companies that proactively respond to these changes could potentially gain a competitive advantage by offering secure, certified systems that meet rigorous US requirements.
On the supplier side, the development teams and associated cybersecurity engineering work could find new prospects in the implementation of secure and reliable ADS and VCS systems, enabling the international commercialisation of their own technologies. The US, with its increasing emphasis on technological sovereignty, could become an attractive market for companies relying on local or certified international technologies.
Conclusion: Need for change in the supply chain is a must
The recently implemented US regulations on connected vehicles (see also the related White House statement) mark a significant turning point for the global automotive industry, especially for companies that rely heavily on Chinese or, in some cases, Russian technology.
In the coming years, it will be crucial to establish alternative supply chains without compromising vehicle safety.
Decision-makers and developers in the automotive industry are under time pressure to assess the risks and opportunities of this transition and to take targeted action to meet the requirements.
The road ahead is not without its uncertainties. However, companies that adopt secure and certified solutions early could emerge stronger in the long term.
In the best case scenario, the security concerns addressed by the new regulations will also provide an opportunity to redefine security standards in vehicle development and thus set the industry on a future-proof course.
