Who's afraid of Chinese EVs?

Hi, this is Mackenzie in Washington. The US is stepping up measures to ensure no Chinese electric automaker even thinks about exporting to A [View in browser]( [Bloomberg]( Hi, this is Mackenzie in Washington. The US is stepping up measures to ensure no Chinese electric automaker even thinks about exporting to America. But first... Three things you need to know today: • Scarlett Johansson is bringing the lawyers into her [dispute with OpenAI]( • Nintendo bought a studio to bring [more outside games to next Switch]( • Samsung named [Jun Young Hyun its new chips chief]( Scary cars President Joe Biden made a big splash last week when he announced [quadruple tariffs]( – of more than 100% – on electric vehicles from China. Less noticed was his commerce chief’s declaration the next day: sometime this fall, the US will issue an entirely new rule around Chinese EVs – not on trade levies, but on data and cybersecurity. This has been in the works for some time. Secretary Gina Raimondo has [said]( she raised concerns about internet-connected cars from China during her August trip to the Asian country. In January, she expressed [fears]( that the vehicles scoop up information about drivers and send it to Beijing. After a sweeping [policy review](, those worries became an official [probe](. We’re now knee-deep in the regulatory process, with nary a disagreeing peep in Washington. The bipartisan consensus is that Chinese connected cars, which currently have a near-zero presence on American roads, could pose an existential threat to US national security. “Maybe it’s a roving spy lab,” Republican Senator Lindsey Graham theorized at a defense tech forum earlier this month. “It’s like an iPhone on wheels,” Raimondo [told]( MSNBC back in February. Democratic Senator Sherrod Brown has already [called]( for a wholesale ban on “finished vehicles and technology that is designed, developed, manufactured, or supplied” from China. Chinese carmakers say they comply with laws and regulations wherever they do business, but that hasn’t reassured US legislators. Underlying all the rhetoric is a basic economic threat to American automakers, whose cars cost about five times as much as Chinese vehicles. Even with tax credits from Biden’s Inflation Reduction Act, US EVs can’t reach the price points of their heavily subsidized Chinese rivals — just ask Tesla Inc. [how sales are going]( in the cutthroat domestic China market. One potential path around tariffs for Chinese auto firms interested in the US might be to set up factories in Mexico, but Brown’s proposed ban would [preclude that]( approach. US officials have repeatedly said the issues are separate. The data protection worry, they say, is that the cars are not unlike TikTok, collecting thousands of pieces of information, spanning everything from voice recordings to daily driving routines. Every smart feature, such as drowsiness detection, comes at a small cost of privacy, like allowing the car to know the contours of your face. In terms of cybersecurity, Chinese EV makers are perhaps more akin to Huawei Technologies Co., which the US blacklisted in 2019 over worries that it could help Chinese [spies]( access American telecom networks. “Imagine a world where, with the flip of a switch, all those cars could be disabled,” Raimondo [said](. “Imagine a world where there’s three million Chinese vehicles on the road in America, and Beijing could turn them all off at the same time.” (That comment, unsurprisingly, didn’t [go over]( very well in China.) But even putting aside the febrile imaginings of EV doomsdsay, discerning the specific risk is a difficult undertaking. On a call with reporters about the probe, an administration official said there was no specific finding or incident that prompted their action. Rather, it emerged from an ongoing review of Chinese tech threats. My colleague Jordan Robertson [wrote]( last week about a Norwegian researcher who’s analyzing a $69,000 Chinese EV for clues about spying. One challenge, experts said, is that the usual investigative tools simply don’t work. Prying open an EV’s many overlapping systems requires a whole different set of bespoke programs than those used for a PC. In the meantime, groups from the [German automotive industry]( to [Ford Motor Co.]( to the [Korean government]( are urging the Biden administration to tread carefully, limiting the scope of potential regulations. Because, well, most global supply chains pass through China in one way or another. The automakers say they’ll need time to adjust their operations, a process that could be quite costly. A top priority for Biden is to issue regulations before Chinese cars ever really break into American markets. The US learned with Huawei networking gear how [expensive]( it can be to decouple with Chinese tech after the fact. Raimondo made that determination clear earlier this month: The US could pursue mitigation measures, she [said](, or “we could take extreme action, which is to say, ‘No Chinese connected vehicles in the United States.’”—[Mackenzie Hawkins](mailto:mhawkins71@bloomberg.net) The big story Microsoft is making a big push to close the gap on Apple’s MacBooks with a new lineup of Qualcomm-powered Copilot+ PCs. These so-called AI PCs will benefit from [better battery life and the latest artificial intelligence enhancements Microsoft has assembled.]( One to watch Nvidia CEO Jensen Huang says countries need to treat data like a natural resource. He speaks to Bloomberg's Ed Ludlow at the Dell World Conference event in Las Vegas. Get fully charged An ‘intelligent diagnostics’ AI startup [filed for IPO in the US Monday.]( Michael Dell expects AI PCs to take over quickly and [be standard by 2025.]( Every new JPMorgan hire will [get training in AI.]( Oracle’s $28 billion health bet is [not doing well.]( More from Bloomberg Get Bloomberg Tech weeklies in your inbox: - [Cyber Bulletin]( for coverage of the shadow world of hackers and cyber-espionage - [Game On]( for reporting on the video game business - [Power On]( for Apple scoops, consumer tech news and more - [Screentime]( for a front-row seat to the collision of Hollywood and Silicon Valley - [Soundbite]( for reporting on podcasting, the music industry and audio trends - [Q&AI]( for answers to all your questions about AI Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? [Get in touch here](. 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