The connected-vehicle rules were adopted in January 2025 under U.S. President Joe Biden, based on national security concerns around data privacy, and have been kept in place under the Trump administration. They prohibit the use of Chinese connectivity software starting in the 2027 model year, and hardware from model-year 2030. Though those deadlines may seem far off, automakers plan vehicle programs years in advance, meaning compliant suppliers must be locked in now.
Amid heightened geopolitical tensions and unpredictable trade wars, auto companies are in the middle of a disruptive uncoupling from China, on everything from inexpensive components – like Eagle’s modules – to battery materials and essential rare earth minerals.
Industry concerns around complying with the regulations were heightened after electric-vehicle maker Polestar PSNY.O, which is majority owned by China’s Geely Holding [RIC:RIC:GEELY.UL], was banned last month from new-vehicle sales in the U.S. under the rule.
The components most affected under the hardware rule include satellite communications systems, external antennas and other microcontrollers that enable a vehicle’s external communication, said Matt Wyckhouse, CEO of security firm Finite State and an adviser to Eagle Wireless.
Migrating parts supply away from China typically represents a significant cost increase. One former Detroit executive said when they compared the cost of a non-China automated-driving system with one using Chinese tech, including LiDAR, they were floored.
"My jaw dropped when I looked at the price increase," the former executive said. Most ADAS componentry is so far not restricted under the connected-vehicle rule, although the government has warned it may address it separately in the future.
Eagle said it is working to reach cost parity with Chinese competitors, but there is still a 5% to 15% gap on its modules.
The shift away from Chinese suppliers also poses logistical challenges. Parts-supplier executives say car companies are demanding deeper visibility into their supply chains to ensure there are no Chinese components that would run afoul of the U.S. rules.
The rule “requires a deep examination of supply chains and aggressive compliance timelines,” said Hilary Cain, senior vice president of policy for the Alliance for Automotive Innovation, an industry group that represents most major automakers.
EV startups like Rivian say they are in a better position to comply than some more-established automakers because they can more nimbly shift suppliers or work to source their own componentry. Wassym Bensaid, the automaker’s software chief, told Reuters that he has been careful in selecting suppliers to work with, and often builds in backups in case of geopolitical disruptions.
Some companies are seeking exemptions from the rule. Ford Motor F.N has asked for authorization to continue importing some China-produced models, Reuters first reported. Volvo Cars <(VOLCARb.ST)>, also owned by Geely, was one of the first automakers to receive an authorization.
The Chinese foreign ministry has previously urged the United States "to respect the laws of the market economy and principles of fair competition." It argues Chinese cars are popular globally because of their technological innovations, reflecting an aggressive home market.
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