Chinese Automakers Pose U.S. National-Security Threat, Biden Says
President warned connected vehicles could collect sensitive data for foreign governments
Gareth Vipers
President Biden ordered the Commerce Department to open an investigation into foreign-made software in cars, citing Chinese technology as a potential national-security risk.
“Connected vehicles from China could collect sensitive data about our citizens and our infrastructure and send this data back to the People’s Republic of China,” Biden said in a statement. “These vehicles could be remotely accessed or disabled.”
The investigation could lead to restrictions on the use of certain parts in cars in the U.S.
Right now, few U.S.-sold cars are made in China and most have software developed by Western firms, making the immediate threat limited. However, Chinese car companies are moving swiftly to expand globally, and if they gain entry into the U.S., the potential risk could be higher, industry analysts say.
The probe is the latest in a series of moves by the Biden administration to protect U.S. industry against what officials see as the growing threat of Chinese cyberattacks.
Within the auto industry, car executives are also growing increasingly nervous about the competitive threat posed by some of these Chinese car companies, whose lower-priced electric cars are gaining popularity in Southeast Asia and Europe. Some automotive CEOs have recently pressed for stiffer trade barriers to limit their expansion, particularly to the U.S.
Currently, Chinese-built cars are subject to an extra 25% tariff on top of the regular 2.5% import duty that generally applies to imported vehicles. The Biden administration has explored raising the tariff on some Chinese-made goods, including electric vehicles, in an attempt to bolster the U.S. clean-energy industry.
A BYD electric-car factory in Changzhou, China. BYD has been scouting locations in Mexico for a factory. Photo: alex plavevski/Shutterstock
While China hasn’t commented directly on Biden’s auto plan, a spokeswoman for its Foreign Ministry said at a Thursday briefing that it rejected as discriminatory another recent move by the president to limit China’s access to personal data of Americans, by saying the U.S. “overstretches the concept of national security.”
Last week, the White House revealed plans to invest more than $20 billion in maritime security, raising concerns that China-built cranes with advanced software at many of the nation’s ports posed a potential national-security risk.
There has been a surge of warnings from top U.S. officials, including Federal Bureau of Investigation Director Christopher Wray, regarding the potential threat to American lives posed by the infiltration of the nation’s critical infrastructure by Chinese hackers.
In the statement, Biden said Chinese automakers were seeking to flood the U.S. market. The Commerce Department probe will explore the vulnerabilities and threats that could arise if a foreign government gained access to vehicles’ systems or data, he said.
Modern vehicles are effectively connected computers on wheels, collecting a vast array of information using sensors, apps and cameras. The increased connectivity of cars has long posed a quandary for regulators.
In July, California’s privacy regulator said it would examine the growing amalgamation of data collected by smart vehicles. Regulators in Europe have opened investigations into how the auto industry uses personal information from cars such as location data, and in some cases forced manufacturers to update software to limit data collection.
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Tesla is facing pressure in China from the country’s top electric-vehicle company BYD. WSJ unpacks the business and manufacturing strategy of BYD and Tesla to uncover what the competition in China reveals about the race to own the global EV space. Photo Illustration: Mike Cheslik
Still, most vehicles sold in the U.S. use software and operating systems made by tech firms based in the U.S. or Europe—not China, industry analysts say. That makes the threat of this kind of software making its way into the U.S. “extremely low,” said Sam Abuelsamid, an automotive analyst at Guidehouse Insights.
While China does make some cameras, microcontrollers and sensors for U.S.-sold vehicles, it would be very hard to get data from them directly, said Alex Oyler, a director at consulting firm SBD Automotive. And those parts are integrated into systems that are largely made by non-Chinese parts suppliers, such as Bosch and Harman, he said.
“If and when some of the Chinese brands that have investment from the China’s government start to move into the U.S. market, that’s when there is a greater potential risk,” Abuelsamid said.
The new U.S. probe underscores how the auto industry is moving to center stage as both President Biden and former President Donald Trump seek to take a tougher stance against China ahead of the presidential election this year.
The Biden administration has been trying to reduce the U.S. auto industry’s reliance on China, including using tax credits to boost electric-vehicle sales and pushing automakers away from Chinese suppliers.
Last year, China became the world’s biggest auto exporter, shipping an estimated 5.26 million domestically made vehicles overseas, according to the China Passenger Car Association. Part of that growth came in the electric-vehicle market, where the country sold more than one million China-made EVs overseas.
While Chinese manufacturers have had limited success in the U.S., due in part to hefty import tariffs, EV automaker BYD, which is backed by Warren Buffett, has set its sights on North America.
The company, which in the fourth quarter overtook
Tesla
for the first time as the world’s largest EV seller, has been scouting locations in Mexico for a factory, from which it would consider exporting cars to the U.S., The Wall Street Journal has reported.
A senior BYD executive, in an interview with Yahoo Finance Live earlier this week, confirmed the Mexico factory plans but said it wasn’t planning to come to the U.S., noting that such a move would be “very complicated” when it comes to an EV.
Tesla Chief Executive Elon Musk has said Chinese car companies have already had much success outside of China and that they are now the “most competitive” globally.
“If there are not trade barriers established, they will pretty much demolish most other car companies in the world,” Musk said during Tesla’s earnings call in January.
The Chinese government has also raised national-security concerns about Western-designed cars sold to its own citizens, saying they could be used for gathering data and information.
In 2021, China restricted the use of Tesla vehicles by military staff and employees of key state-owned companies, saying the car’s cameras record images constantly and obtain data, including when, how and where the vehicles are used.
Tesla has said its privacy protection policy complies with Chinese laws and regulations and it attaches “great importance” to securing user information.
Mike Colias contributed to this article.
Write to Gareth Vipers at gareth.vipers@wsj.com
