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Washington: President Joe Biden took steps Thursday toward blocking Chinese electric vehicles (EV) from entry to the US auto market, saying internet-connected cars and trucks from China posed risks to national security because their operating systems could send sensitive information to Beijing.

The immediate action was the opening of a Commerce Department investigation into security threats, which could lead to new regulations or restrictions on Chinese vehicles.

But administration officials made clear it was the first step in what could be a wide range of policy responses meant to stop low-cost Chinese electric vehicles – either manufactured in China or assembled by Chinese companies in countries such as Mexico – from flooding the US market and potentially driving domestic automakers out of business.

China has rapidly scaled up its production of electric vehicles in recent years, setting it on a collision course with Biden’s industrial policy efforts that seek to help American automakers dominate that market at home and abroad.

Some of its smaller cars sell for less than $11,000 each – significantly less than a comparable American-made electric vehicle.

The administration’s actions Thursday come as Biden’s likely opponent in November, former President Donald Trump, criticises him for pushing automakers toward electric vehicles – and as each of the candidates tries to cast himself as tougher on China.

The measures stemmed from conversations with Detroit automakers, union autoworkers and EV giant Tesla, which was recently supplanted by Chinese company BYD as the world’s biggest seller of electric cars.

“China is determined to dominate the future of the auto market, including by using unfair practices,” Biden said in a statement accompanying the announcement. “China’s policies could flood our market with its vehicles, posing risks to our national security. I’m not going to let that happen on my watch.”

Thursday’s action did not immediately impose new barriers on Chinese electric vehicles, which already face high tariffs and have not yet penetrated the growing American market for clean energy cars.

At Biden’s direction, the Commerce Department has begun an investigation into the threat from technology embedded in Chinese electric vehicles. That includes Chinese-made versions of common automotive software, which administration officials said could track where Americans drove and charged their vehicles, or even what music or podcasts they listened to on the road.

Administration officials noted that American auto manufacturers that sold vehicles to customers in China were essentially forced by Chinese officials to use Chinese software in their vehicles.

The announcement was the latest example of Biden’s moving to ramp up technology restrictions on China and continued a bipartisan trend toward more antagonistic trade relations between the world’s largest economies. The Commerce Department investigation ordered by Biden marks the first use of a new authority established under an executive order issued in 2019 by Trump.

Biden officials said the investigation could result in new US restrictions on vehicles that depended on software from China.

Administration officials are eyeing other steps to further impede imports of Chinese vehicles, which have already surged through European markets, as a result of low prices driven in part by significantly lower labor costs. That could include increasing a 25 per cent tariff on China’s vehicles.

“We’ll certainly continue to look at a range of policies to make sure that our carmakers and our autoworkers continue to be the most competitive in the world,” Lael Brainard, who heads the President’s National Economic Council, said in an interview.

The Treasury Department has already proposed rules meant to limit China’s ability to supply materials for cars and trucks that qualify for a $7,500 electric vehicle tax credit included in Biden’s signature climate bill.

The Commerce Department investigation announced Thursday grew from a series of conversations administration officials had with automakers last fall, after the settlement of a United Automobile Workers strike during which Biden stood with the union and joined a picket line. The carmakers told administration officials about the restrictions they faced selling in China, including on software.

Biden aides began to grow concerned about what might happen if the United States did not impose similar restrictions on Chinese software, which administration officials say only a handful of cars in America run on today.

“China is flooding foreign markets with their autos,” Brainard said. “Many of those vehicles can connect on a continuous basis with our infrastructure potentially, with the drivers’ smartphones, with nearby cars. So they’re collecting a tremendous amount of information.”

In a briefing call with reporters, Commerce Secretary Gina Raimondo said it was “scary to contemplate the cyber risks, espionage risks, that these pose”.

Brainard stressed that Thursday’s action was limited to software concerns. But she added, “It’s also very important for our economic security and our national security to have a strong and vibrant US auto industry, with US autoworkers.”

(Published 29 February 2024, 15:33 IST)

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