U.S. Auto Sales Could Decline Due to Proposed Rule

By David Shepardson

WASHINGTON (Reuters) – The Commerce Department stated on Friday that U.S. auto sales could decrease by up to 25,841 vehicles annually, with prices potentially rising if proposed regulations banning internet-connected Chinese vehicles and associated software and hardware are enacted.

According to the department, U.S. automakers and businesses selling in the United States “may be less competitive in the global market due to relatively higher vehicle prices.” The estimated annual decrease in vehicle sales due to this rule ranges from 1,680 to 25,841 vehicles.

In an effort to mitigate national security vulnerabilities that may be leveraged by China, the department forecasted that the rule could restrict between $1.5 billion to $2.3 billion in vehicle inputs from Chinese or Russian companies for vehicles sold in the U.S.

The proposal is seen as an effective ban on Chinese vehicles since most will feature internet-connected software and hardware. However, a process for seeking exemptions has been proposed for companies.

The Commerce Department aims to implement software prohibitions starting in the 2027 model year, while the hardware ban is set to take effect either in the 2030 model year or January 2029. The public will have 30 days to comment before the rules are finalized.

The main advantage cited by the Commerce Department is the “reduction in the chance of a catastrophic attack due to the exfiltration of data and remote manipulation of connected vehicles.”

Recently, the department emphasized that General Motors (NYSE: GM) and Ford Motor (NYSE: F) would need to cease importing vehicles from China as a consequence of the rule.

GM markets the Buick Envision and Ford offers the Lincoln Nautilus, both of which are assembled in China. In the first half of 2024, GM reported sales of approximately 22,000 Envisions and Ford reported 17,500 Nautilus sold in the U.S.