Some automakers and suppliers are already making major changes to their supply chain and organizational structure to prepare for a major regulatory change in the US. It’s a ban on Chinese software and hardware in cars, a provision that will first hit software for 2027 models and then hardware from 2030 models.
The Volvo Cars case shows how sensitive these rules can be. The US Office of Information and Communications Technology and Services has granted Volvo a special exemption, so the company can continue selling cars despite its Chinese ownership structure. Volvo is majority-owned by the Chinese company Zhejiang Geely Holding Group, which is why it had to seek special approval from the US authorities.
Chinese software and hardware are changing the auto industry
The new rules do not only apply to directly manufactured Chinese components. The ban includes hardware and software designed, developed, manufactured or supplied by companies owned, controlled or under the jurisdiction of China or Russia. It is particularly important that the restrictions also apply to finished cars that use such software.
This means that manufacturers will not be able to just formally replace the supplier if there are still Chinese connections in software solutions, telemetry, cloud integration or communication modules. Some cars use middleware and cloud components developed in China, even when the physical modules come from suppliers in Germany, Japan or Korea.
General Motors has already ordered thousands of suppliers to source raw materials and parts outside of China by 2027 to prepare for the hardware part of the ban. The Buick Envision continues to be imported from China, while the successor to that model is slated to go into production in Kansas in 2028. The Ford Lincoln Nautilus is also produced in China through a joint venture with Chinese partners.
U.S. authorities say the equipment in the respective cars could be an easy target for foreign governments, potentially allowing the collection of driver data or even the abuse of vehicle systems on U.S. roads. Therefore, manufacturers will have to submit compliance statements at least 60 days before importing or selling vehicles for model years that fall under the new rules.
Although Volvo has a special status due to Geely ownership, the wider problem affects the entire industry. Any company that has some kind of foreign interest, direct or indirect, will have to more carefully prove the origin of software, hardware and supplier connections. For car manufacturers, this means a new phase of supply chain checks, additional costs and the possible delay of certain models, reports Automotive News.