The US Bars Chinese Connected-Car Software From Model Year 2027, and India Sends Chinese Auto Investment Through Government Approval Under Press Note 3

The United States Department of Commerce has a rule, in force since 17 March 2025, that bars the sale of new cars running software from companies owned or controlled by China or Russia, starting with Model Year 2027. India has no rule of that kind that this piece could find as of 14 October 2026, and the security case there is argued case by case, as in the contested report on China-linked intrusions into its grid control centres. It reaches the same security concern from the investment side: Press Note 3 of 17 April 2020 sends any investment from a country sharing a land border with India through government approval. The two systems use different tools. Each is paired with a trade measure, a 100 per cent tariff on Chinese electric vehicles in the US and a reduced import duty for carmakers that build in India.

What the US connected-vehicle rule covers

The Bureau of Industry and Security (BIS), part of the Commerce Department, issued the final rule on 14 January 2025 and the Federal Register published it on 16 January (90 FR 5360, 15 CFR Part 791). BIS’s press release says the agency found that certain technologies from the People’s Republic of China (including Hong Kong and Macau) or Russia pose an undue and unacceptable risk to US national security. The stated worry is that a hostile supplier could pull out personal data about drivers and owners, or remotely manipulate vehicles.

The rule covers passenger vehicles under 10,001 pounds. It bars transactions involving two things when there is a sufficient link to China or Russia: Vehicle Connectivity System hardware, meaning telematics units and cellular, Bluetooth, satellite and Wi-Fi modules, and the software for that system and for automated driving. A manufacturer with such a link also cannot sell new connected vehicles in the US, even ones built there.

The dates are set by model year. Software and the sales ban apply from Model Year 2027. Hardware imports are barred from Model Year 2030, or from 1 January 2029 for hardware not tied to a model year. BIS’s own page does not mention commercial vehicles. Venable’s July 2026 newsletter says the federal regulatory agenda carries a long-term item for a Commerce proposal on medium- and heavy-duty connected vehicles, with no date.

How a carmaker proves compliance

The rule works through paperwork. DLA Piper’s April 2026 alert says a Declaration of Conformity is due at least 60 days before the first import or sale of each model year of a covered vehicle. In it the maker certifies that the covered software did not come from a person with a China or Russia link, that due diligence supports this, and that records are kept for BIS.

Software had a cutoff of its own. Venable’s February 2026 alert says legacy software developed by a foreign-adversary entity could stay in vehicles only if no such entity maintained or updated it after 17 March 2026, and that any transfer of source code or rights had to be finished by that date.

For makers that need an exception, BIS decides specific authorizations on a 90-day target, according to DLA Piper. On 18 June 2026 BIS added General Authorization No. 3, which lets suppliers apply directly to be listed in an Approved Supplier Registry. Vehicle makers may then use a listed supplier’s hardware or software without a specific authorization, but still declare it in their Declaration of Conformity. The BIS document says the registry “will be published at a later date,” and this piece did not find one.

The tariff and the bill in the Senate

Cars from China face a second US barrier that has nothing to do with software. A USTR notice of 18 September 2024 (89 FR 76581) raised the Section 301 tariff on Chinese electric vehicles to 100 per cent, applying to goods entering the US on or after 27 September 2024. A March 2026 trade guide from Camtomx lists the rate as still 100 per cent, and this piece found no later USTR notice changing it.

Congress is considering putting the connected-vehicle rule into statute. The Senate Commerce Committee approved the Connected Vehicle Security Act of 2026 (S. 4429) by voice vote on 22 July 2026, with two amendments, and sent it to the full Senate. As the Automotive Service Association, a trade group for repair shops, summarised it, the bill would bar connected vehicles and covered software from foreign-adversary countries from 1 January 2027, and hardware from 1 January 2030. The full Senate had not voted on it in the sources this piece opened.

India’s tool is the ownership gate

Press Note 3 was issued on 17 April 2020. For how India opened its economy to foreign capital in the first place, see the 1991 reforms. The government’s own background note says it aimed to curb opportunistic takeovers of Indian companies during the COVID-19 pandemic. Under it, an entity from a country that shares a land border with India, or an investment whose beneficial owner is situated in or a citizen of such a country, can invest only through the government route, which means prior approval. A transfer of ownership that leaves the beneficial owner in such a country needs approval too.

A beneficial owner is the person who ultimately owns or controls an investment, whatever name is on the paperwork. The Cabinet changed how that test works on 10 March 2026. The Press Information Bureau (PIB) release says the test now follows the definition in the Prevention of Money Laundering Rules, 2005, and applies at the level of the investor entity. Investors with non-controlling beneficial ownership from a land-border country of up to 10 per cent may use the automatic route, with the investee company reporting to the Department for Promotion of Industry and Internal Trade (DPIIT).

The same release sets a 60-day decision deadline for proposals in capital goods, electronic capital goods, electronic components, and polysilicon and ingot-wafer manufacturing. In those cases Indian citizens or Indian-owned entities must hold majority shareholding and control at all times. Automobiles are not on that list. Autocar Professional’s report of 12 March 2026 quotes the DPIIT Secretary as saying “Opening up does not mean that concerns with regard to security have gone away,” and quotes a joint secretary saying all restrictions on investors from land-border countries still apply.

What was reported about BYD in 2023

In July 2023 the Chinese carmaker BYD and the Hyderabad company Megha Engineering had sought approval for a plant of about $1 billion to make electric cars and batteries, with 10,000 to 15,000 vehicles a year. On 22 July 2023, CnEVPost and Business Today reported, citing the Economic Times, that the Centre had rejected the plan. Both reports rest on unnamed officials. One is quoted as saying “Security concerns with respect to Chinese investments in India were flagged during the deliberations,” and another as saying existing rules did not allow such investments.

The government published no rejection order, and Business Today notes the account contains no on-record statement from BYD, Megha or the government. On 28 July 2023 CnEVPost, relaying Reuters, reported that BYD had told Megha it would shelve the investment while the proposal was under review, and that the company had not formally withdrawn it.

BYD does sell in India, in imported form. Outlook Business reported on 18 March 2026 that BYD India’s head of EVs put 2025 sales at about 6,000 cars, up about 84 per cent, across four models, of which only the Atto 3 and eMAX 7 were homologated, meaning certified for Indian roads. The same report says overseas makers can import up to 2,500 completely built units a year without full local homologation.

The import scheme and Chinese technology through Indian firms

India’s other tool, covered in detail in our look at the country’s electric vehicle numbers, is open to any carmaker. The Ministry of Heavy Industries notified the Scheme to Promote Manufacturing of Electric Passenger Cars in India, known as SPMEPCI, on 15 March 2024. An approved applicant may import completely built electric cars with a customs value (CIF, cost plus insurance and freight) of at least $35,000 at 15 per cent duty for five years, up to 8,000 a year. In return it must invest at least Rs 4,150 crore (about $500 million), start making cars within three years, and reach 25 per cent domestic value addition in three years and 50 per cent in five, backed by a bank guarantee.

Applicants must also have global automotive revenue of at least Rs 10,000 crore and global fixed assets of at least Rs 3,000 crore. The ministry’s 2 June 2025 release says the application window could be reopened until 15 March 2026. A Rajya Sabha reply of 31 July 2026 restates the scheme’s terms and lists no approved applicants.

Chinese technology also reaches India through Indian-controlled companies. A Reuters report of 24 June 2026, carried by Autocar Professional, says JSW Motor has rights to use and adapt several Chery platforms, for an upfront payment of about Rs 2,000 crore (20 billion rupees) plus royalties, citing people familiar with the matter. It says Tata Motors will use a Chery platform for premium electric cars under what both companies call a supply deal with no equity stake and no transfer of technology know-how. A senior Indian official told Reuters that deals which build local manufacturing over time are a constructive way of engaging with China.

Side by side

The US rule asks what software and radios are inside a car and who supplied them, and Press Note 3 asks who owns the company that builds it. The US adds a 100 per cent tariff on Chinese electric vehicles, and India offers a 15 per cent duty to any maker that commits Rs 4,150 crore and meets local-content targets. Neither system is written as a ban on one named company. The American rule names China and Russia, and India’s note names a category, countries that share a land border with India.

S. 4429 would give the US software restriction a statutory start of 1 January 2027, and the full Senate had not voted on it as of 14 October 2026.