The US ban on Chinese smart cars feels like a step backward for competition.
The Biden administration’s has recently decided to bar smart cars with Chinese or Russian technology from the US market. This policy, finalized by the Commerce Department, mirrors the earlier Huawei ban which was framed as a security measure but was also perceived to be protectionist in nature for the US tech industry. This new move feels like the auto industry’s equivalent.
National Security vs. Market Innovation
The administration justifies the move as a necessary safeguard against potential risks. Commerce Secretary Gina Raimondo highlighted concerns about connected vehicle technologies, which can collect vast amounts of sensitive data, including GPS tracking, microphone inputs, and personal information. Yet, this rationale has a familiar ring to it, echoing the arguments used to justify banning Huawei’s 5G infrastructure.
While protecting national security is paramount, this blanket approach risks sidelining legitimate competition under the guise of security concerns. Chinese automakers such as BYD, Geely, and Nio have made significant strides in the global EV market, pushing the boundaries of affordability and technology. Rather than fostering competition to match these advances, the US policy risks shielding its market from global challenges, which could lead to stagnation.
Learning From the Huawei Ban
The Huawei ban, implemented in 2019, sought to protect sensitive communications networks but also resulted in significant geopolitical and economic ripples. By excluding a major player, the US reduced competition in telecommunications, leading to higher costs and delayed infrastructure rollouts in certain areas. A similar trajectory in the automotive sector could slow progress in autonomous driving and smart vehicle innovation.
Chinese automakers are leaders in the EV revolution. Brands like BYD have pioneered battery technology and cost-effective manufacturing, making EVs accessible to a wider demographic globally. These innovations have compelled other automakers to step up their game, benefiting consumers worldwide. However, the new restrictions threaten to deprive American consumers of these advancements, limiting choices and driving up prices.
A Protectionist Stance?
While national security is cited as the primary driver, the policy also aligns with a protectionist agenda. The US automotive industry has faced challenges in keeping up with the rapid advancements of Chinese EV makers. The 100% tariff on Chinese EVs, coupled with this latest ban, sends a clear message: the US is wary of competing on a level playing field.
Impact on Consumers
By 2027, when these bans take full effect, American consumers could face fewer options for affordable, technologically advanced smart cars. While domestic automakers may benefit from reduced competition, consumers stand to lose. Chinese automakers have consistently delivered value-driven vehicles with cutting-edge features, forcing other manufacturers to follow suit. Removing this pressure could lead to complacency, higher prices, and slower innovation.
The Road Ahead
As the US prepares for a new administration, the future of this policy remains uncertain. President-elect Donald Trump may choose to uphold, amend, or discard the rules. However, the broader question is whether the US should continue down a path of exclusion or embrace global competition as a catalyst for growth.
Personally, I’m not sure what the right approach is. I think the Malaysian one has some merits and some flaws. On the plus side, we’ve allowed some competition to ‘wake up’ sleeping giants to the reality of the global automotive market, but on the negative side of things many long-term investors with local-assembly are being brushed aside with preferential pricing going to fully-imported vehicles.
