Goodbye to cheap Chinese cars. The US prohibits them because “they are an unusual and extraordinary threat”, also for Europe

To the government of Joe Biden He has less than a week left in power, yet he has not relaxed and announced the prohibition to sell in the United States connected vehicles that incorporate Chinese technologyboth in components and software, considering that they could pose a risk to national security.

The ban will be phased in, starting in 2027 for software and 2030 for computers, according to the US Department of Commerce. This ban will have effects in Europe. On the one hand, European brands that use Chinese components in their cars will no longer be able to sell their models in the US. And on the other hand, this means that China only has Europe as an important market to sell its cars.

Objective: break industrial dependence on China, including that of Europe

In late September, the Department of Commerce launched a public investigation into the matter, which has just concluded with the publication of new rules aimed at “securing the connected vehicle supply chain from external threats.”

As of January 1, 2027, in the case of software, and January 1, 2029, in the case of equipment, it will be impossible for a manufacturer to put cars for sale in the United States that integrate these products if they are of origin Chinese.

Even the Department of Defense has included brands like CATL, the world’s largest manufacturer of batteries for electric cars, on its blacklist because it considers it a military company. Now Washington once again justifies its decision on national security grounds.

“Cars are no longer just steel on wheels, they are computers. “They have cameras, microphones, GPS devices and other technologies connected to the Internet,” explained outgoing Secretary of Commerce Gina Raimondo.

“It doesn’t take much imagination to understand how a foreign adversary with access to this information could pose a serious risk to both our national security and the privacy of American citizens,” added Gina Raimondo.

At the moment, A car contains between 100 and 200 million lines of code in their software with a multitude of systems connected to the cloud (GPS, ADAS driving aids and connected services). A connected fighter like the F-35, however, only contains 25 million lines of code. A priori, it is easier to hide functions in a car’s software than in any other connected product. The decision to close the path to Chinese software is, therefore, not only a protectionist measure.

For this reason, he explained. The US takes steps “to keep (People’s Republic of China) and Russian-made technologies off American roads.” Yes, Russian technology is also prohibited, which in the automotive sector is close to absolute zero, but not in the field of apps and software.

For practical purposes it means that European car brands that use this type of Chinese components will not be able to sell their models on American soil. PolestarSwedish sister brand of Volvo and property of Geelyis the most obvious example, but rare is the brand that does not use some electronic component manufactured in China in its cars.

For example, the future Mercedes CLA, which will be available with a 100% electric and mild hybrid model, will have all kinds of Chinese technology. Thus, the mild-hybrid engine will be manufactured by Horse, the joint venture of Renault and Geely based in Madrid.

In addition, this new CLA will have a semi-autonomous driving system from Chinese startup Momenta. The CLA will thus be the first Mercedes with the capacity for urban autonomous driving, or at least semi-autonomous. Be that as it may, this system involves software and hardware created in China, which would close the doors of the American market to the brand’s small coupe saloon.

Beyond our brands that sell cars in the United States, the implications of this measure will also affect all of Europe. For Chinese manufacturers, with the doors permanently closed to one of the first and most lucrative markets in the world, there is only one left in which they can try to sell its surplus production: Europe.

With productive excess capacity, many local factories do not reach 70% of its capacity, and a price war unleashed more than a year ago by Tesla, Chinese brands have their lifeblood in exports, thanks to the enormous margins with respect to China that they can apply outside their country. Thus, this new ban, which joins the 100% US tariffs on all cars ‘made in China’ and on Chinese batteries, means that the salvation of many Chinese brands passes through Europe.

Although Europe has implemented additional tariffs for electric cars imported from China, which in total range from 17.8% (Tesla) to 45.3% (MG), hybrid cars and PHEV plug-in hybrids are exempt from those tariffs additional and are only taxed at the generic 10%.

In China, sales of PHEV hybrids increased by 70% and their market share is close to 41% in 2024 (provisional data), that is, just over 4.9 million units in 2024. In addition, interest in PHEVs It doesn’t just happen in China. In the United States, sales of this type of car grew by 25%, while those of electric cars only increased by 5%.

Thus, the growing preference of Chinese motorists for PHEVs over 100% electric vehicles should not be taken lightly by European manufacturers. And just as happens with electric cars, The price of Chinese PHEVs is more attractive than that of their European equivalents. Examples include the BYD Seal U DM-I and the new Jaecoo 7 PHEV.

After a continuous price drop, PHEVs in China are now an option comparable to gasoline and electric models. And it is something that is also seen in Europe, where faced with the decline in electric sales, Chinese brands are now betting on PHEVs to establish themselves in Europe.