US Impending Ban on Software Sparks Concerns Over Connected Car Future

The U.S. government’s impending ban on certain car parts from China and Russia, particularly those critical for connectivity and vehicle autonomy, is raising concerns across the automotive industry.

Automakers, including General Motors, Toyota, Hyundai and Volkswagen, are calling for a delay in the rule’s enforcement, citing potential disruptions to production timelines. The ban, which targets components like cameras, radar sensors and connectivity modules, has industry officials worried about meeting new compliance deadlines. While the U.S. justifies the move on national security grounds, the new regulations may threaten to disrupt the already fragile global supply chain for key automotive technologies.

Supply Chain Challenges Ahead

“There will be an impact to the supply chain,” Brian Rhodes, connected car and vehicle experience director at S&P Global Mobility, told PYMNTS in an interview. “We’ve seen with many examples (including COVID-19, the 2021 Texas ice storms, and the Francis Scott Key Bridge collapse) just how fragile the automotive supply chain is so any disruption will certainly cause a ripple effect. One impact is simply the amount of homework an OEM has to do to understand which components in their supply chain are being sourced in China and what the other options are to re-source them if needed. This will have an impact in the mid-term, for sure.”

Specifically, Rhodes noted “the first wave would be re-sourcing connectivity modules, but then we need to ask what capacity looks like elsewhere. It’s not common practice for suppliers to keep long-term excess capacity open and opening excess capacity can be expensive. Many of these communication modules are reasonably commoditized and have been dropped by tier suppliers as margin wore out. Suppliers will need to understand how lengthy this ban may be to decide if there’s opportunity to re-enter a product to market.”

As for technology adoption, Rhodes said, “we do not anticipate any long-term impact. China does not dominate sourcing in such a way that will halt progress that is driving consumer usage and monetization, cost savings in platform development, increased safety content, and ultimately higher margin in vehicles.”

A Potential Roadblock for Technology Adoption

Greg Zakowicz, senior eCommerce expert at Omnisend, offered a similar outlook on the potential impact of these regulations.

“It could delay adoption and advancement, but I am not sure it will hamper things all that much in the end,” he said in an interview with PYMNTS. “Companies, like they always do, will source components from alternate places. The biggest challenge will be the data: where is it processed and stored? If we see Chinese companies as the dominant players in the connected technology space, it could delay the adoption as manufacturers will be left vetting ‘friendly’ companies and trust their components and systems will stand the test of time.”

Since these technologies represent “the future of automobiles,” Zakowicz added, “a compromise has to be reached. These regulations put manufacturers in a difficult position. Will they cause current connected vehicles to utilize banned systems? If not, it will put an unfair burden on those companies, giving their competitors an edge. We’re going to need a large technology company to step up to create a system for manufacturers to use or have manufacturers take on the cost of developing a more universal system. Might Apple, which recently shuttered its self-driving car division, look at this as an opportunity to create a new revenue stream?”

As the landscape evolves, Zakowicz noted the divide between U.S. and Chinese technology policies is becoming more pronounced, driven by national security concerns. With China seen as a key adversary, more restrictions on foreign technologies in U.S. systems seem likely, which could impact how automotive companies approach sourcing and innovation in the future.

“It’s becoming an ‘us versus them’ world in the name of national security,” Zakowicz said. “With China being a mostly adversarial superpower, we should expect to see further tightening of allowable technology in U.S. systems.”

Contactless Payment Solutions Meet Consumer Demand

As national security concerns influence technological developments, they also intersect with innovations in consumer-facing services like the move toward contactless payments.

In this context, Global Partners is expanding its pay-by-text solution from PayByCar to more than 300 of its convenience stores and gas stations across eight states, with the program set to be fully implemented by the end of 2025.

Initially launched at Alltown gas stations in Massachusetts in 2021, the service allows customers to pay for fuel by texting from their vehicle, using their E-ZPass transponder or a non-toll sticker, and activating pumps without touching the station keypad.

In addition to fueling, PayByCar plans to extend its technology to other transactions, including off-street parking, car washes, drive-thru services, and in-store purchases at convenience stores. Global Partners operates a network of gas stations and convenience stores across the Northeast and Mid-Atlantic.

Risks Surrounding Potential Disruptions

As the automotive industry prepares for potential new regulations, Edward Wilford, senior research director, automotive for Omdia/Wards Intelligence, noted the heightened risks surrounding potential disruptions.

“The fear of an inadvertent sub-component of software or hardware coming to light at the wrong time is real and I think there will end up being a raft of exceptions to this, assuming the next administration continues the policy,” Wilford said in an interview with PYMNTS. “BYD already had some concessions on its business, Polestar was warning on its operations in the U.S., presumably in the interests of a concession. The documentation required is not yet fully defined and will be taxing for everyone involved. This feels like a blunt tool, especially since at present there are very, very few Chinese companies exporting vehicles to the U.S.”

Wilford added this move may be broadly welcomed by U.S. automakers — especially those in the higher price range — but its long-term effects could be complicated.

“U.S. OEMs will be broadly happy with this if it keeps pressure away from the lower price range, although I would imagine retaliatory measures from China can be expected in time and that could really signal the end of western automakers making significant moves inside China without strong partnerships, probably to the advantage of China,” Wilford said.