WASHINGTON, Sept 27 (Reuters) - The Commerce Department

said Friday that U.S. auto sales could drop by up to 25,841

vehicles a year and prices rise if proposed rules go ahead that

would ban Chinese vehicles that connect to the internet and key

Chinese software and hardware.

U.S. automakers and others selling in the United States "may

be less competitive in the global market because of the

relatively higher prices of their vehicles," the department

said. It estimated between 1,680 and 25,841 fewer vehicles would

be sold annually because of the rule.

Acting to reduce national security vulnerabilities that

could be exploited by China, the department estimated the rule

could bar $1.5 billion to $2.3 billion in vehicle inputs from

Chinese or Russian companies for vehicles sold in the United

States.

It said previously that the proposal would amount to

an effective ban on Chinese vehicles

since all would have internet-connected vehicle software

and hardware, but it has proposed a process for companies to

seek exemptions.

The Commerce Department proposes making software

prohibitions effective in the 2027 model year, while the

hardware ban would take effect in the 2030 model year or January

2029. The public has 30 days to make comments before the rules

can be finalized.

The Commerce Department said the rules' primary benefit

would be "a reduction in the chance of a catastrophic attack due

to the exfiltration of data and remote manipulation of connected

vehicles."

This week,

the department said General Motors ( GM ) and Ford Motor ( F )

would need to stop importing vehicles to the U.S. from

China under the rule.

GM sells the Buick Envision and Ford sells the Lincoln

Nautilus -- both assembled in China -- in the U.S. market. In

the first half of 2024, GM sold about 22,000 Envisions and Ford

sold 17,500 Nautilus in the U.S.