The U.S. is preparing to widen its confrontation with China over technology by challenging the world’s second-largest economy in the rapidly emerging field of autonomous and internet-connected vehicles.

Biden administration officials plan to propose limits on U.S. sales of Chinese vehicle software as soon as this month, according to people familiar with the matter, a step aimed at addressing security concerns raised by a new generation of so-called smart cars. The move would include curbs on use and testing of Chinese technology for autonomous vehicles, the people said.

Many of today’s cars — both gas and electric — are equipped with devices connecting them to the internet, making them potential targets for hacking. The pending restrictions stem from an investigation of cybersecurity risks from Chinese vehicle software that President Joe Biden launched in March.

China has emerged as a leader in electric vehicles and components for smart cars, in part because of widespread government subsidies and support. BYD Co. sold more fully electric vehicles than Tesla Inc. in the fourth quarter last year, and global carmakers have become increasingly dependent on Chinese suppliers for technology needed for connected vehicles.

Chinese auto companies like BYD have a limited presence in the U.S. because of a 27.5% tariff introduced under former President Donald Trump, and Biden announced in May that the levy would rise to more than 100%. With the pending restrictions on internet-connected vehicle technology from China, the administration is seeking to act before Chinese-made cars become prevalent in the U.S.

The restrictions, which would be enforced by the Commerce Department, are meant to keep Chinese companies from collecting data on U.S. drivers and sending it back to China. The rules would also effectively keep Chinese suppliers from establishing a bigger foothold in the U.S., giving the American auto industry time to build its own supply chain for connected vehicles.

The Commerce proposal may include a phase-in period to allow automakers to find new domestic sources or supplies from U.S. trade partners, according to the people, who spoke on condition of anonymity to discuss confidential deliberations. They emphasized that the plans are not yet final.

Alan Estevez, Commerce under secretary for industry and security, previewed the range of possible measures at a conference in July, saying the agency was looking at both vehicle software and components and planning to issue its findings later this month.

The Commerce Department is “concerned about the national security risks associated with connected technologies in connected vehicles,” a spokesperson said in a statement, and will issue a proposed rule focused on “specific systems of concern.” Industry will then have the opportunity to comment, the agency said.

Ahead of the U.S. move, groups ranging from the German automotive industry to Ford Motor Co. to the Korean government have urged the Biden administration to limit the scope of potential regulations and give automakers time to adjust their supply chains. US officials hosted a summit last week focused on connected vehicles with representatives from Australia, Canada, Germany, the European Union, India, Japan, South Korea, Spain and the UK, according to a document obtained by Bloomberg.

Commerce Secretary Gina Raimondo broached the issue with Chinese officials during her August 2023 visit to the country. In May, she told U.S. lawmakers that internet-connected vehicles are “controlled by software, which is coming from Beijing in the case of Chinese-made cars.” That allows those vehicles to collect everything from drivers’ location to conversations, she said — information that “goes right back to Beijing.”

Officials in Beijing have previously rejected U.S. claims of a security threat stemming from cars made in China and accused the Biden administration of unfairly suppressing Chinese companies.

There have also been security questions raised about Lidar, the laser technology that self-driving cars use to see roads, traffic signs and signals and obstacles. The U.S. Defense Department has already banned Chinese lidar maker Hesai Group. U.S. lidar maker Ouster Inc. has led a push to ban the Chinese manufacturer’s lidar for commercial use.

The measures are expected to focus for now on software and systems that collect vehicle data, but could include any hardware systems with embedded software, one of the people said. There will likely be a later round of restrictions that would look at hardware for connected and self-driving vehicles, the people said.