South Korean automakers face supply chain pressure due to US ban on China
According to foreign media reports, the United States will ban the sale of connected cars using Chinese software from the second half of 2026, and will impose further restrictions on Chinese hardware from 2029, a move that will force global automakers such as Hyundai Motor and Kia Motors to diversify their supply chains.
Although the impact on software may be limited due to South Korean automakers' relatively low dependence on Chinese software, the hardware supply chain remains a concern given South Korea's reliance on Chinese suppliers for certain auto parts.
"Software components in our connected cars are rarely sourced from China, so we don't think the new US regulations will cause immediate disruption to the company," said a Hyundai Motor staff member.
However, the hardware supply chain of South Korean automakers is more vulnerable to the new US regulations. An auto industry insider pointed out that South Korean automakers "still rely on China" for hardware such as wiring harnesses. Wiring harnesses are necessary to transmit electronic signals inside vehicles, and South Korean automakers have been sourcing wiring harnesses from China due to lower labor costs in China.
The US ban on Chinese connected car technology gives Korean automakers about two years to adjust software compliance and five years to adjust hardware compliance to ensure they are ready before the ban takes full effect.
In response to the changing regulations, experts urged the Korean government and the Korean auto industry to actively negotiate with US authorities to reduce potential negative impacts. Earlier this year, the Korea Automobile & Mobility Association (KAMA) submitted public comments to the US Department of Commerce, advocating for a clearer definition of "connected car" to avoid excessive impact.
"The entire automotive supply chain from automakers to parts manufacturers is closely connected. It will be difficult for Korean automakers to avoid the consequences of this ban," said Jang Hong-chang, a researcher at the Korea Automotive Technology Institute. The Korean government and the Korea Automobile Industry Association need to continue to use their influence to negotiate with the United States to reach favorable terms and minimize damage."
KAMA has pledged to work closely with the Korean government and Korean automakers. "We will take a step-by-step approach and work to protect the interests of the Korean auto industry while meeting U.S. regulatory requirements," said a KAMA staff member.
According to a proposed rule announced by the U.S. Department of Commerce's Bureau of Industry and Security on September 23, the U.S. will ban the sale and import of connected cars equipped with Chinese software from the 2027 model year, and the sale and import of connected cars equipped with Chinese hardware from the 2030 model year. Among them, the software ban will take effect from mid-2026, the hardware ban will take effect from mid-2029, and vehicles not divided by model year will be subject to these regulations from January 2029.
In a broad sense, connected cars are vehicles that can connect to communication networks and provide various information technology services, including autonomous driving functions. The U.S. government introduced these restrictions due to concerns about national security, because Chinese-made technology in connected cars is at risk of being hacked, which could lead to the theft of sensitive data and even remote control, causing chaos.
"Today's vehicles are equipped with important technologies that are connected to the internet, such as cameras, microphones, and GPS tracking systems," U.S. Commerce Secretary Gina Raimondo said in a statement on September 23. "This creates a national security vulnerability that must be closed, which is why the United States is taking aggressive steps to limit the use of Chinese technology in these vehicles."