China, explained.
If replicated in Australia, the US ban would prevent the sale of any connected vehicle made by a Chinese owned brand - and likely others too (Brent Lewin/Bloomberg via Getty Images)
Canberra faces complicated trade-offs between competing domestic and foreign policy objectives.
Subscribe to The Informer for monthly expert analysis, and to Events for advance notice of visiting world leaders and distinguished guests.
You may unsubscribe from Lowy Institute newsletters at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
China’s EV manufacturing and Australia’s connected vehicles conundrumChina’s EV manufacturing and Australia’s connected vehicles conundrum
Australia last month registered what felt like a rare, good news story in the fight against climate change. Official data showed that Australia was just about on track to meet its commitments to reduce emissions 43% by 2030 off a 2005 baseline.
The same annual update in 2023 projected a 35% decrease. The Albanese government’s vehicle fuel efficiency standards – finally passed in May this year – are a significant factor in the more sanguine forecast.
The tougher standards are expected to slash 19% from transport emissions by 2030. Electricity has made most of the early running in reducing emissions. Sectors like transport will need to pick up more of the slack.
While the Albanese Government is reluctant to trumpet the fact too loudly, uptake of increasingly affordable Chinese electric vehicles (EVs) are baked in to these forecasts.
BYD already boasted the third and fourth most popular EV brands in Australia by sales across the first three quarters of the year. In the year to April, 80% of EVs sold were manufactured in China – albeit mostly by Tesla or formerly European (now Chinese-owned) brands such as Volvo and MG.
Meanwhile, in Australia the closure of Ford’s Victorian factories in 2016 marked a grim milestone in the ineluctable decline of local manufacturing and hollowing out of its industrial base. An inadvertent silver lining is that Australia has been spared the politically invidious challenges facing allies in Europe, United States and East Asia who are preparing for an onslaught of Chinese-made EVs.
If a Huawei-esque public pressure campaign does in fact materialise, it is difficult to imagine Canberra – regardless of the political hue of the government – putting up a spirited resistance.
Many of these made-in-China EVs that are so spooking auto industry titans contain substantial amounts of Australian copper, iron ore and lithium.
The Biden Administration’s proposed ban on Chinese connected vehicles threatens to shatter Australia’s pleasant if not slightly diplomatically awkward reverie.
In simple terms, connected vehicles refers to any vehicles with inbuilt software enabling internet connectivity and communication with other vehicles.
Liberal Senator James Paterson has strongly implied that the Albanese government should act in lockstep with the US. Paterson excoriated Cyber Minister Tony Burke for continuing to drive a Chinese-made EV even after seeking security advice, while analysts suggested a ban, evoking Australia’s forward-leaning efforts in banning Chinese 5G suppliers.
The final contours of the US ban are evidently undecided. But in their current form, if replicated in Australia, they would prevent the sale of any connected vehicle made by a Chinese owned brand (even those built outside China).
In fact, because Tesla sources 95% of its components locally for its Shanghai factory, Australians would almost certainly be banned from purchasing Chinese-made Teslas. Probably not a vote winner in previously blue-ribbon Teal seats.
With the predictably whimsical President-elect Donald Trump returning to the White House, there are many unknowns which caution against precipitate action.
The most obvious known unknown is Trump’s intentions towards the connected vehicles ban, which is expected to be finalised before inauguration day. Trump’s musings in the campaign oscillated between calls for banning Chinese connected vehicles and inviting Chinese carmakers to build US factories.
Even if Trump follows through, it is not clear that banning Chinese connected vehicles will become a cause célèbre in the same way that the Huawei ban was during Trump’s first term.
Would be Trump Svengali and “First Buddy” Elon Musk already appears to be strongly influencing Trump’s thinking on US EV subsidies. Musk has an evident pecuniary interest in continuing to export Chinese-made EVs to markets outside the United States.
If a Huawei-esque public pressure campaign does in fact materialise, it is difficult to imagine Canberra (regardless of the political hue of the government) putting up a spirited resistance. This would especially be the case if other Five Eyes members circled the wagons. Canada looks set to follow the United States, but the United Kingdom appears to be more reticent so far.
Though blowback from China would probably ensue, there is something to be said for safety in numbers. It was the absence of this safety that so exposed Australia to economic coercion after Scott Morrison called for an investigation into the origins of Covid-19 in 2020.
Still, the aphorism that “China is a big country and other countries are small countries” is engrained in Beijing’s strategic thinking. Beijing genuinely seems to have a hard time understanding that countries such as Australia ever make decisions independently of more powerful allies.
Where it possibly can, Australia should avoid reinforcing this erroneous perception – particularly if Sino-US relations become even more febrile. Reluctant to hit Washington too hard, China finds it much easier to lash out at countries perceived to be doing its bidding.
Then of course there are the very real security risks – which include the potential for surveillance and even remote control. As European regulators are currently doing, there will undoubtedly be discussions in Canberra on measures short of an outright ban.
These may include localised data storage requirements, no go zones (i.e., near military bases) and purchasing bans for individuals with security clearance. Whether any of these mitigation measures would be wholly effective is unclear.
None of this will be easy for Canberra. Avoiding the temptation for absolutism of any kind (where it be on climate, trade, alliances, or security) is probably a good starting point.
About the author
Henry Storey
Henry Storey is Manager - Projects, Research and Analysis at Dragoman with a focus primarily on Asia and the South Pacific.
The most-pressing world events explained by Lowy Institute experts and global contributors, in your inbox, every Thursday.
You may unsubscribe from The Interpreter at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
