Technology bans reshape automotive supply chains

After Chinese code ban, hardware to follow

For years, the software code used to operate and link many American cars came almost exclusively from Chinese makers. Since the spring of 2026, cars sold with Internet access in the United States must certify that their systems are free of Chinese software. That ban has already led to sourcing changes and one electric vehicle (EV) maker is exiting the U.S. market.

Behind the ban

• The U.S. Commerce Department’s Bureau of Industry and Security bans code written in China or by Chinese-owned firms. This prohibition extends throughout the vehicle, from infotainment controls and onboard cameras to advanced driver-assistance systems.
• The regulations aim to block potential security risks. Electronic systems with microphones, GPS modules and cameras could all be exploited to send data abroad illegally. To prove compliance to the U.S. government, auto manufacturers must track the digital origins of code.
• This has sparked a race to locate, analyse and replace lines of code that are often buried deep in layers of a modern car’s supply chain. But many Chinese suppliers are reluctant to share production details and often lock down code as proprietary intellectual property. This leaves auto manufacturers with the difficult task of verifying code they don’t fully control.

What to expect next

• Upscale EV maker Polestar announced that it will stop selling vehicles in the United States after the current model year. The company did not receive certification for the 2027 model year or beyond under the Connected Vehicles Rules. That means the 32 U.S. Polestar dealerships will largely become service points for existing customers once current inventory is sold. Polestar’s Canadian operations are not affected.
• By 2029, Chinese-made connectivity hardware will also be banned from use in cars sold in the American market. For car makers, this means more disruptive changes.

What it means for automotive supply chains

• Automakers will need greater visibility to chips and connectivity components. As they map and diversify the supply chains for their embedded technologies, parts makers should anticipate shifts in sourcing and supplier qualification requirements. Tesla, for example, has reported that they are no longer using China-based parts suppliers for U.S.-bound vehicles.
• Expect production and inventory realignment. As manufacturers replace Chinese hardware, sourcing and logistics teams should prepare for engineering changes and potential disruptions to production schedules.
• The compliance burden may accelerate efforts to nearshore or friend-shore critical vehicle technologies, increasing cross-border freight flows among the United States, Canada, Mexico and trusted trading partners.

New data on electric and hybrid vehicle performance in extreme weather

It’s commonly known that electric vehicles lose efficiency when it’s very cold. New research published by AAA shows it’s also true for hybrids, that hot weather also leads to loss of performance and the negative effects of sub-freezing temperatures are worse than previously assumed.

What to know

• At 95° F, the study showed that EVs lost approximately 10% of their gas-mileage equivalent and 8.5% of their driving range compared to a 75-degree baseline. Hybrids dipped by 12%.
• Cold-weather effects were unexpectedly stark. At 20° F, EVs lost 36% of their gas-mileage equivalent and 39% of their range, while hybrids lost 23% of their fuel efficiency. Researchers were surprised to see such a dramatic impact on hybrids. Hybrids hold the advantage when it’s very cold thanks to the internal combustion engine warming the battery.
• When it comes to cost, at 95°F EVs cost almost $7 more per 1,000 miles to charge at home and $16 more at a public charger, while hybrids are roughly $13 more expensive.

What it means for automotive supply chains

• With more knowledge of how hybrids and EVs perform in various weather conditions, consumers may increasingly start factoring in local climate when car shopping. Regional preferences for engine types may become more pronounced.
• Next-generation solid-state batteries and faster charging may change this equation going forward. But experts expect some performance losses to remain the norm for any vehicles heavily reliant on batteries for power.

U.S. tariff changes

The latest changes to U.S. tariff policy underscore that trade compliance and customs expertise remain critical supply chain capabilities:

• Across-the-board Section 122 tariffs expired in July and were immediately replaced with Section 301 tariffs tied to screening for forced labour in supply chains. Imports from 60 countries are subject to these new tariffs, at rates of 10% or 12.5%.
• While negotiations on the U.S.-Mexico-Canada Agreement continue, Canadian goods face the threat of 50% tariffs under Section 338, which allows for additional duties when a foreign country is found to be treating U.S. commerce unfairly or discriminatorily. The implementation date is 19 August 2026.
• In retaliation for certain taxes on U.S. tech companies’ revenues, the U.S. administration has threatened 25% tariffs under Section 301 on goods from several European countries. It is currently unclear if and when these may be implemented.

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