In a move that could reshape the autonomous vehicle industry, the U.S. Commerce Department is said to be readying a proposal to ban Chinese software in autonomous and connected vehicles, according to insiders.

What Happened: The Biden administration is planning to issue a proposed rule that would prohibit Chinese software in U.S. vehicles with Level 3 automation and above, Reuters reported on Monday. This would effectively ban the testing of autonomous vehicles produced by Chinese companies on U.S. roads.

The administration also plans to propose a ban on vehicles equipped with Chinese-developed advanced wireless communications modules from U.S. roads. Automakers and suppliers must confirm that none of their connected vehicles or advanced autonomous vehicle software was developed by a “foreign entity of concern” like China.

Last month, the Commerce Department announced its intention to issue proposed rules on connected vehicles in August, with expected limitations on some software made in China and other countries considered adversaries.

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A spokesperson for the Commerce Department expressed concerns about the national security risks associated with connected technologies in vehicles. The department’s Bureau of Industry and Security will issue a proposed rule focusing on specific systems of concern within the vehicle.

On Wednesday, the White House and State Department hosted a meeting with allies and industry leaders to discuss the national security risks associated with connected vehicles. The administration’s planned rule was disclosed at this meeting.

Meanwhile, a spokesperson for the Chinese Embassy in Washington urged the U.S. to abide by market principles and international trade rules and create a level playing field for companies from all countries.

Why It Matters: This move comes amid a surge of Chinese autonomous driving IPOs, such as WeRide Inc. (NASDAQ:HSAI) and Baidu (NASDAQ:BIDU), entering the market. The Biden administration has been considering measures to limit China’s access to advanced technologies, including AI chips and autonomous driving technology.

Meanwhile, Chinese automakers like BYD (OTC:BYDDF) and NIO (NYSE:NIO) have been approved to test their automated driving technology on public roads in China. Meanwhile, companies like XPeng Inc. (NYSE:XPEV) are revamping their teams to stay competitive in the autonomous race.

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This story was generated using Benzinga Neuro and edited by Pooja Rajkumari