The automotive high-technology race is now as important to governments as it is to the industry itself.

In September 2024, the Biden administration announced a ban on Chinese connected car technology, including hardware and software. This came on top of existing policies including a 100% tariff on Chinese electric vehicles and withdrawal of the government’s $7,500 EV-purchase subsidy for vehicles built with Chinese-made components. Apparently, after imposing the tariff and purchase disincentive, the government decided more measures were needed to protect the American auto industry adequately, including extending the protection to include software. Hence the ban on connected car tech.

The move is reminiscent of earlier action to block Chinese telecom equipment from American 5G infrastructure. Other countries and territories, including the European Union, stopped short of an outright ban but also took significant steps to limit use of Chinese 5G equipment. In both the 5G and connected car bans, the US government has cited national security as a key concern in its decision. On the other hand, protecting indigenous suppliers is known to be another major objective. Chinese companies are strongly positioned in both sectors and, in the case of 5G, American companies could effectively have been locked out of the infrastructure market; probably fatally, given the longevity of investments by network operators and the interdependencies between the individual items of equipment.

In the runup to last year’s presidential election in the US, both sides agreed – perhaps it was the only issue they agreed on – that trade sanctions were necessary to protect American industry. The incoming Trump administration swiftly announced sweeping tariffs on goods entering the US. And then backtracked on some. While some may expect Trump to adopt a more business-friendly position, the signals on this are somewhat mixed at present. His declared intent to prioritize American interests should bring an element of predictability to the policy making. Except that he is far from predictable.

While protectionist policies have their proponents and could be seen to help western companies keep a foothold in the 5G race, the counterargument that such policies can disadvantage the wider economy is clear. An Accenture report produced for Qualcomm in 2021, examining the overall economic impact of 5G, suggested that 5G services could add $1.5 trillion to US GDP and create up to 16 million jobs. On the other hand, a report by Oxford Economics on the economic impact of restricting competition – commissioned by Huawei – forecasted that infrastructure investment costs could be up to 24% higher in the US and that slower rollout would leave millions waiting longer for 5G coverage, wiping many billions from the national GDP each year.

The proposed ban on connected car equipment could have a similar effect. New in-car services, automated driving and autonomous vehicles including robotaxis, present huge opportunities for automotive brands and could transform vehicle usage and ownership models. The economic implications are enormous. And, just as with 5G, Chinese brands are positioned to dominate.

Recognizing that China formed a strategy in the early 2000s for investing in electric vehicle technologies, and provided billions in subsidies and tax breaks to help local OEMs make the transition, analysis by Yole shows how Chinese companies have come to dominate the automotive lidar market. Lidar – the light-emitting sensing technology that permits vehicles to map road conditions in three dimensions – is a critical enabler for automated driving. Ultimately, to permit full driving autonomy, several lidars per vehicle will be needed including forward, side and rear-facing units to ensure proper distancing between vehicles and negotiate road features such as on-ramps and driving at highway speeds. In 2022, according to the Yole report, Chinese lidar manufacturers owned 73% of the global market.

The typical numbers of proximity sensors and object sensors per vehicle, including cameras, radar and lidar, are increasing quickly as manufacturers compete to introduce advanced eyes-off autonomous driving applications. According to Yole, the Chinese XPeng G9, an EV with 19 sensors on-board, was the first electric vehicle to be approved for robotaxi testing without modifications. Chinese manufacturers are continuing to move quickly toward autonomous driving and passenger vehicles are now the major market for lidar units. With sales growing at a CAGR of 59%, total revenues will reach $975 billion by 2028.

All this provides yet another vivid example of how advanced technology – particularly in communications and computing – is the root of prosperity in today’s world; generating large revenues and sustaining high-value jobs in itself and moreover the engine for worldwide economic power and influence. Shaping the dynamics in consumer and industrial markets, today’s high-tech determines business capabilities, workplace productivity, buyer behavior, the ways people live and carry out essential functions like banking and shopping, and social interaction. It defines access to the media that shapes opinions and offers an enormous source of accurate intelligence about the ways people think and act. It is no surprise that legislators want a piece of this and should seek to gain control, just as defense-technology contracts have traditionally been kept close to home.

Government involvement in technology markets is certainly more active today, seeking to retain control and exclude foreign actors, than in the past. Technology determines the speed at which economies can move, and protectionist policies show at least the extent to which governments understand how they may act to retain that power. While excessive protectionism can damage the economy and put the nation at a disadvantage, failure to intervene carries the risk of falling behind in the technology race and losing control. It’s a difficult balance and – just as with a tightrope act – we can expect continuous adjustments of position as we all look forward and keep moving.

Alun Morgan is technology ambassador at Ventec International Group (venteclaminates.com); alun.morgan@ventec-europe.com. His column runs monthly.

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