Weeds Of Protectionism: U.S. Bans On Connected-Car Tech & Their Global Consequences

Earlier this year, the United States finalized rules that will cut Chinese and Russian connected vehicle technology out of the American market. Beginning with the 2027 model year, software that enables connectivity and higher level driver assistance will be barred. By 2030, the hardware will be as well. The argument is framed in terms of national security, but the outcome is more predictable in industrial and consumer terms. The United States is building another wall around its auto market.

The regulation comes from the U.S. Department of Commerce and is focused narrowly on connected vehicle technology. Starting in 2027, software that enables vehicle connectivity and advanced driving features at SAE Level 3 and above will no longer be allowed if it originates in China or Russia. By 2030, hardware that enables these functions will also be banned. The scope covers vehicle connectivity systems such as cellular, Wi-Fi, satellite, dedicated short range communications, Bluetooth, and other modules that allow two way communication above 450 MHz. It also covers software that directly enables high level automation. These are the building blocks of over-the-air updates, remote diagnostics, connected services, and advanced driver assistance that goes beyond lane keeping or adaptive cruise.

Other technologies are specifically excluded from the ban. LiDAR, radar, and cameras used for sensing are not covered. Ultrawideband systems used for keyless entry and vehicle access are allowed. One-way radio functions such as AM, FM, and satellite radio are also considered low risk and remain outside the rule. Tire pressure monitoring systems and key fobs that use frequencies below 450 MHz are not included unless they are integrated into a broader connectivity module. In effect, the regulation leaves untouched the sensing and access technologies that make cars functional, but removes Chinese and Russian players from the heart of connected mobility and high level automated driving.

Enforcement of the new rule rests with the Bureau of Industry and Security inside the Department of Commerce, using the same authorities it applies in export controls and sanctions. Automakers will be required to file annual declarations of conformity, keep detailed supplier records for a decade, and prove that their connected vehicle software and hardware are free from Chinese and Russian links. Customs and Border Protection will play a role in screening imports, while Homeland Security Investigations and the Department of Justice can pursue civil and criminal cases if violations are found. With penalties reaching more than $360,000 per violation — which arguably could be per vehicle sold — in civil cases and up to $1 million in criminal cases, the regulatory system is designed less like a traffic code and more like a national security regime.

Electric vehicles are hit harder by the regulation because they depend much more heavily on the systems being restricted. Modern EVs are built around connected platforms that manage over-the-air updates, remote diagnostics, and higher level driver assistance, while internal combustion cars often ship with only basic telematics and infotainment. Industry assessments suggest that more than 80% of new EVs in the U.S. by 2027 will be delivered with connectivity stacks and software features at risk under the ban, compared to less than half of new ICE models. The cost of stripping out Chinese modules and rewriting software will fall disproportionately on EV makers, raising prices and delaying features in the very segment that is supposed to define the future of the American auto market.

It is not the first time the metaphor of a walled garden has come to mind. Once you wall off a garden you protect it from outside threats, but you also restrict the flow of new seeds and cross pollination. Over time the weeds of complacency grow thick and choke off what was once fertile ground. The new auto rules are another step in that direction. The American market is being designed as a closed system where only approved components and suppliers are allowed, regardless of cost or capability.

For consumers, this means less choice and higher prices. The Chinese EVs that are already reshaping Europe, priced in the $25,000 to $35,000 range and loaded with connected features, will never make it across the ocean. Americans will continue to pay more for vehicles that deliver fewer capabilities. The promise of high level autonomy will take longer to reach them because much of the development work in connectivity and advanced driving software is being carried out in Asia. The rules do not make American cars better. They make them more expensive while reducing what they can do.

For domestic manufacturers, the weeds will show up in compliance and cost. Every vehicle must now come with annual declarations of conformity. Bills of materials and supplier attestations must be filed and kept for 10 years. The penalties for violations are large enough that no major manufacturer can ignore them. The regulatory burden does not make American cars more competitive. It forces companies to spend time and money managing paperwork while their rivals abroad continue to innovate.

Tesla is the most directly affected of the U.S. automakers. Its business model depends on constant over-the-air updates and a steady expansion of Full Self Driving functions, which push into the SAE Level 3 space that the regulation explicitly covers. Any reliance on Chinese suppliers for connectivity modules or software stacks now becomes a liability. The company will have to re engineer its systems and prove compliance on an annual basis, while also losing access to lower cost modules that helped keep expenses down. Tesla benefits from the rule in that low cost Chinese EVs will not compete with it in the U.S., but abroad it will be disadvantaged if its software and connectivity rollouts slow while competitors in China and Europe move faster.

Stellantis faces a different but equally heavy burden. With brands spread across North America and Europe and joint ventures in China, its supply chains are deeply intertwined with PRC suppliers. Its connected platforms will require substantial restructuring to be compliant in the U.S. market. General Motors is somewhat better positioned but still exposed, especially through its use of Chinese made telematics modules and its investments in advanced autonomy through Ultra Cruise.

Ford is the least affected of the large American firms, as it has been more cautious in rolling out Level 3 systems and has aligned more of its connectivity around Western technology partners. Among foreign firms, Volvo is effectively barred due to its Chinese ownership, while Volkswagen and Mercedes must strip Chinese components out of their U.S. offerings at the cost of delay and expense.

Globally, the new rules lock U.S. automakers into an ever smaller corner. To build cars for Americans, they must design stripped down versions of their global platforms with non Chinese connectivity stacks. Those versions cost more to build. Outside the United States, competitors will continue to source from China, where supply chains are shorter, costs are lower, and integration is faster. The result is that American cars will look less attractive in export markets, and foreign buyers will turn to brands that can deliver more for less.

The strategy also increases dependence on a narrow set of allied suppliers. Japan, South Korea, Taiwan, and Europe will become the only approved sources for many critical modules. If there is another chip shortage or trade disruption, American automakers will be fighting for access in a crowded field. The closed garden becomes not only more expensive but more fragile.

The trajectory is clear. The United States is building a market that is closed, sheltered, and inward looking. The global industry is moving in the opposite direction, scaling quickly, spreading innovation, and competing on both cost and features. The American auto garden will be walled off and over time the weeds will grow. The rest of the world will walk past the wall and buy cars elsewhere. This is another own goal driven by a bipartisan fear of China, and the result will be that the world simply learns to ignore both the U.S. market and U.S. products.