Hyundai Mobis' wide screen head-up display system / Courtesy of Hyundai Mobis

Korean carmakers need to widen their parts sourcing channels and increase the use of locally produced vehicle components, as the U.S. moves to tighten regulations on imports of connected vehicles with Chinese and Russian software and hardware, auto experts and industry officials said, Tuesday.

This follows a recent decision by the U.S. Department of Commerce, which announced that starting in 2027, the U.S. will ban the import and sale of connected cars equipped with Chinese or Russian software. From 2030, the regulation will also extend to connected vehicles with hardware sourced from companies based in those countries.

The restriction will pose a direct threat to Korean carmakers, such as Hyundai Motor and Kia, which use Chinese parts for their vehicles primarily due to cost advantages.

As detailed guidelines on the regulation are still pending, local firms are advised to prepare for the worst-case scenario by decreasing their reliance on Chinese parts and boosting the domestic production of auto parts, according to experts.

"Hyundai Motor and Kia need to develop concrete action plans to diversify their parts supply channels, given the strong possibility that U.S. authorities may extend regulations to other vehicle components beyond the current connected modules," Lee Ho-geun, an automotive engineering professor at Daedeok University, said.

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The latest regulation issued by the U.S. authorities focuses on restricting the entry of vehicle connectivity and automated driving systems that use parts sourced from China and Russia. This new regulation is an advanced step following an earlier warning issued in May. The core reason cited for this decision is the potential risk these countries pose to U.S. national security.

Others also echoed a similar view and advised local carmakers to gradually increase the localization of their auto parts.

"For now, Korean parts manufacturers cannot compete against Chinese rivals in terms of price competitiveness, but we need to keep enhancing it from a long-term perspective, as the global supply chain is being disrupted rapidly in most key industrial areas, such as chips and batteries," Kim Moon-tae, head of the industry policy division at the Korea Chamber of Commerce and Industry, said.

Other experts have also emphasized the need for the government and carmakers to collaborate in persuading U.S. authorities.

"It is realistically tough for local carmakers to reduce their parts reliance on China in a short period of time, so we have to increase lobbying efforts and appeals to U.S. authorities to minimize the potential damage to Korean carmakers," Kim Pil-soo, an automotive technology professor at Daelim University College, said.

Officials at a local carmaker said they are intensifying their monitoring of the issue.

"The scope of parts that will be regulated remains vague for the time being, so we have no choice but to keep a close eye on whether the U.S. announces any other detailed restrictive measures," the official said on condition of anonymity.