Hyundai Motor, Kia urged to diversify supply chains as US moves to regulate Chinese connected cars

By Lee Min-hyung, The Korea Times - Hyundai Motor and Kia need to diversify their parts supply chains beyond China and expand their lobbying efforts to prepare for potential U.S. measures aimed at banning Chinese-connected vehicles, according to experts, Thursday.

This reaction follows a series of warnings issued by the U.S. Department of Commerce, highlighting concerns that connected cars manufactured by Chinese companies could pose national security threats by potentially leaking sensitive data on American motorists to the Chinese government.

On Wednesday (local time), U.S. Commerce Secretary Gina Raimondo announced that the department will issue rules on Chinese connected vehicles this autumn and consider taking "extreme actions" against them due to security risks.

However, since the U.S. government has not yet clarified the specifics regarding the scope of connected vehicles, the recent announcement has sparked concerns that Korean automakers may also face broad and comprehensive regulatory risks from the U.S.

Automobile industry analysts said local carmakers should come up with specific action plans by preemptively diversifying their supply chains.

“Hyundai Motor and Kia have to brace for the worst by reducing their reliance on China and broadening their supply chains into other countries such as Vietnam,” Lee Ho-geun, an automotive engineering professor at Daedeok University, said.

“There stands a possibility that the U.S. will regulate any connected vehicles that are equipped with Chinese parts. Under the scenario, the Korean automakers will be seriously affected, so they are advised to make more efforts to reduce the proportion of Chinese parts in their automobiles.”

Even if this may end up increasing the initial costs, maintaining the status quo could result in a larger financial burden for Hyundai Motor and Kia in the long run, according to the expert.

“However, it is realistically challenging for automakers to completely avoid using any Chinese components, even if they are minor,” Lee said. “For this reason, the two home-grown automakers should appeal more to the U.S. authority that their connected vehicles are free from any data leak risks by proving that critical components are sourced in Korea and other safe regions.”

Other experts urged the government and automakers to expand their lobbying activities in the U.S., so they can map out more concrete countermeasures against the upcoming regulatory hurdle there.

“The automakers need to beef up their lobbying actitivites and gain a clearer understanding of the regulatory direction from the U.S.,” Kim Pil-soo, an automotive technology professor at Daelim University College, said.

This will help them set up a specific Plan B or even Plan C, according to the professor.

“Leaving diverse scenarios open is a must, as the U.S. authority has not shared any concrete regulatory direction, even on what exactly the regulated connected vehicles are,” Kim said.

From the viewpoint of Korean automakers, the regulatory action by the U.S. can be widely seen as a political gesture in its power struggle with China. But as of now, there is no clear breakthrough or solution to this situation, according to the professor.

“Hyundai Motor Group may have to leave all possibilities open,” he said. “They have no clear strategies to take, other than expanding the lobbying activities for swift decision-making to the upcoming regulation.”

Last month, the Korean government and a local automobile association conveyed their concerns about the U.S. regulation to the U.S. authorities. They requested clarification on the scope of connected vehicles that would be subject to the regulation.

Source: https://www.koreatimes.co.kr/www/tech/2024/05/419_374762.html 

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