By David Shepardson, Jarrett Renshaw and Michael Martina
WASHINGTON (Reuters) – President Joe Biden, vowing to “do right by U.S. auto workers,” launched an investigation this week into whether Chinese-made vehicles could be used to spy on Americans, a far-off threat given the few such cars on U.S. roads now.
The White House announced the probe Thursday citing national-security risks about “connected” cars creating “new avenues for espionage and sabotage.”
Biden is campaigning for re-election, and U.S. automakers have voiced fear bordering on panic about having to compete at home with Chinese electric vehicles (EVs). An auto lobbying group recently said this could cause an “extinction event”.
China’s EV industry has surged past all others in recent years and aims to export vehicles globally, often at far lower prices than American EV offerings.
Biden nodded to that economic threat in his statement voicing concerns about espionage: “We’re going to make sure the future of the auto industry will be made here in America with American workers.”
Political and policy experts acknowledge the threat of Chinese spying but also see Biden’s saber-rattling as another opportunity to demonstrate he is tough on China.
“The announcement seems as much oriented at blunting accusations of being weak against China as it is at finding a solution to this challenge,” said Scott Kennedy, a China specialist at Washington’s Center for Strategic and International Studies.
Washington’s Chinese Embassy criticized Biden, saying he was “hyping up the ‘China threat’ theory” to suppress competition.
Kennedy said the probe is reasonable, but he did worry it could also spur protectionism based on “over-stated national security concerns.” He warned this could upend global supply chains and hurt U.S. production.
Many industry officials urged higher trade barriers against Chinese automakers, and the U.S. and Europe are considering them. Tesla CEO Elon Musk said in January that otherwise, China will “demolish” global auto rivals.
Biden’s administration offered no evidence of spying involving the very few Chinese-made cars on American roads today. Still, China has a history of using technology for U.S. surveillance. Washington last year launched an operation to fight a Chinese hacking operation that compromised thousands of internet-connected devices, Reuters reported in January.
Democratic strategist Jennifer Holdsworth said the administration’s probe aligns with Biden’s backing of union manufacturing jobs: “Good policy is often good politics.”
BATTLEGROUND MICHIGAN
Restrictive trade policy toward China is a rare area of partisan agreement in a deeply divided America. Biden has essentially continued the trade war against China started by his predecessor – and now 2024 campaign opponent – Donald Trump.
Biden’s rhetoric seeks to build support in Michigan, the hub of the U.S. auto industry and one of a handful of competitive states that will decide the 2024 election, said Michigan pollster Bernie Porn. GM, Ford and the U.S. operations of Chrysler parent Stellantis are all headquartered in the state.
“He really needs to go on the offensive and disarm Trump’s argument that their jobs are going away to places like China,” he said.
Trump often ridicules EVs on the campaign trail, calling them a job-killing “hoax” and a capitulation to China.
Biden, who has the endorsement of the United Auto Workers labor union, has repeatedly emphasized the importance of the Detroit Three automakers and their factory workers.
Senator Gary Peters, a Michigan Democrat, said Chinese EVs posed both an economic and a security threat: “The bottom line is there’s no place in the U.S. for vehicles made by Chinese Communist Party backed companies.”
China EV makers’ export surge is adding to the industry’s fears and political pressure on Biden. BYD, the world’s largest EV maker, confirmed plans this week to open a plant in Mexico at the U.S. doorstep, and launched its least-expensive car, the Dolphin Mini hatchback, in Latin America.
BYD has denied it plans to use Mexico as a springboard for the much larger American market.
Biden faces a gauntlet of conflicting political incentives in crafting his EV policy. He has tried to balance the environmental goal of forcing rapid EV adoption with trade policies aimed at effectively banning cars and components from China, which has developed the world’s most advanced and affordable supply chain for batteries and other EV components.
In reforming a $7,500 subsidy for EV buyers starting this year, the administration denied the incentive to cars with batteries or critical battery minerals from “foreign entities of concern” including China. This initially knocked dozens of vehicles off the eligibility list, including some from the Detroit Three, and sent automakers including Tesla scrambling to build China-free EV component supply chains.
As such rules raise the challenge for U.S. automakers in building affordable electric cars, the administration is separately negotiating with Detroit automakers on emissions rules meant to force them to speed up their EV transitions.
The proposed regulations would dramatically restrict tailpipe emissions with the goal of raising U.S. EV market share from less than 8% now to 67% in 2032.
‘SCARY’ SCENARIOS
As pressure builds from U.S. automakers and unions for more anti-China trade barriers, the administration is raising alarms of espionage threats, or even darker scenarios, involving high-tech Chinese cars.
Commerce Secretary Gina Raimondo recently suggested that the Chinese government might try to wreak havoc by cutting off hundreds of thousands of Chinese connected vehicles on American roads. High-tech Chinese cars, she said, “could be immediately and simultaneously disabled by somebody in Beijing. It’s scary to contemplate.”
She also raised the threat of everyday privacy invasions by “bad actors” from “abroad.”
Connected vehicles collect huge amounts of sensitive data, she said, possibly including where a parent drops off kids at school, common routes to the office and calls to drivers from a doctor about a medical issue or a bank about an overdue loan.
“It’s an incredible amount of information that you think is private, but that could be transmitted abroad,” Raimondo said, adding that text messages, location data, emails are all vulnerable.
Anna Puglisi, a former U.S. counterintelligence official, said Commerce’s national security concerns were valid as cars incorporate more sensors and track location and personal contact information, especially when the companies involved come from a “strategically motivated nation-state” like China.
Some China automakers are state-owned and its communist government weilds broad authority over the whole sector.
“The broader issue is how do you deal with a nation-state that blurs public and private, civil and military, and commandeers its commercial sector to serve the strategic goals of the state?” Puglisi said.
(Reporting by David Shepardson, Jarrett Renshaw, Michael Martina and David Brunnstrom in Washington, additional reporting by Ben Klayman in Detroit, editing by Brian Thevenot and David Gregorio)
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