The United States will ban Chinese automotive programs due to espionage suspicions

China and the United States are destroying the automotive market

In response to tense relations between China and the United States, American authorities have imposed ultra‑high import tariffs on Chinese cars. Now selling them in the U.S. looks almost unprofitable for the average consumer. But this is only the beginning.

Starting March 17, regulators plan to ban any software product created in China that connects to foreign cloud services if it is used in vehicles sold in the American market. This applies to both driver assistance systems (ADAS) and on‑board communication platforms, which will be regulated from 2029.

Why this matters
Modern cars are equipped with cameras, microphones, GPS systems and connectivity to external servers. Through these channels detailed data about location, interior sound and even passengers’ personal information can be collected. If the software is developed in China, it may automatically transmit such data to clouds of an adversary country.

American automakers will have to prove that none of their vehicles’ electronic systems are controlled by Chinese software or a company outside its borders. This rule applies to cars with Chinese equity holders – they will also be inspected under the same criteria.

The second wave of “import substitution”
This initiative is a continuation of the program launched in 2023 when the U.S. sought to reduce dependence on Chinese semiconductors. Now attention has shifted to software that is equally critical for modern vehicles.

Many companies develop and manufacture the entire on‑board ecosystem (from sensors to UI) in China. However, due to complex supply chains it can be difficult to pinpoint the exact source of the software, and developers usually do not disclose source code for competitive reasons.

What this means for automakers
Reinstalling software on existing hardware is practically impossible: each system is designed for specific sensors and architecture. Replacement could pose road‑traffic safety risks if initiated by a non‑component supplier.

Regulators are expected to offer temporary concessions, but there is one exception: Chinese code can be used until March 17 only if it was transferred under the management of a company without Chinese ties.

Industry reaction
The changes have already forced global software developers to move their staff out of China and seek Western partners. Major Chinese holdings are being compelled to review their stakes in foreign companies.

An example is Italian tire maker Pirelli: its “smart” tires connect to cloud services, and the largest shareholder is the Chinese holding Sinochem. The company is now negotiating to reduce the share of Chinese shareholders to 34 % or to separate its U.S. business.

Unexpected winner
American startup Eagle Wireless emerged as one of the main beneficiaries. Last year it acquired source code from the world’s largest automotive software developer, enabling it to quickly adapt to new requirements and offer solutions fully compliant with American standards.

Thus, the battle for control over automotive technology infrastructure will continue, and automakers are forced to rethink their supply chains and software ecosystems in response to the new rules.