The federal opposition is questioning how Australia might respond to moves in the US to effectively ban Chinese car manufacturers on national security grounds.

Earlier this week the Biden administration announced it would move to ban Chinese-made software and hardware from cars driven in the United States.

It cited national security concerns, including fears over data collection, and even risks to infrastructure like the power grid.

Chinese car manufacturers have grown their presence significantly in Australia, with BYD the second-most popular electric vehicle manufacturer after Tesla.

And industry experts expect that popularity to continue, with some forecasting China will eventually become the number one source of cars imported into Australia.

The federal government says it is in contact with the US about the new moves against Chinese car companies.

"The government is closely monitoring the developments in the US on this matter, and the Department of Home Affairs has been proactively engaging with the US government to understand the implications of any proposed regulation," said a spokesperson for the Home Affairs department.

But the Coalition has called for more urgent action, with Shadow Home Affairs Minister James Paterson arguing there is a fairly clear cause for concern.

"It's hard to see how it is in our national interest for companies headquartered in an authoritarian state to become the dominant supplier of vehicles in Australia and retain access to the enormous amounts of data they collect," he said.

"It's time for our Cybersecurity Minister Tony Burke to step up and outline what action the government will take or why he thinks it's not a problem even though our closest allies do."

The US cited concerns that Chinese-made cars could be used for surveillance, or even remotely controlled — and deliberately crashed.

Chinese cars are a very small slice of the US car market, with heavy tariffs on electric vehicles in particular.

Chief strategy officer at CyberCX, Alistair Macgibbon, said the Biden administration's fears are not unfounded.

"Everything from internet connected sensors, turning on microphones in vehicles, turning on cameras as those vehicles drive," he said.

"It could be further still. If it's a connected technology, if the software is updated out of China, could those cars all just be stopped?

"And we should remember China now makes up something like 60 per cent of the global supply of EVs in the world."

The federal government has taken steps to protect against Chinese companies having access to critical systems before.

That includes banning Chinese-owned app TikTok from government devices, and Chinese company Huawei from taking part in the 5G rollout.

Mr Macgibbon says there is a case for Australia to act again, arguing concerns should extend to other connected devices — like solar panels and batteries.

"We led the world when it came to 5G security," he said.

"We were kind of mocked for it originally, and then pretty much every free-thinking nation followed.

"We've, frankly, in the last seven or eight years, done almost nothing when it comes to device security, not where a device is manufactured, but where it's controlled from."

Any restrictions come with complications

Auto industry figures argue any sort of moves to restrict, or even ban, Chinese-made components in cars on Australian roads would be complicated.

And it would risk setting back the government's aim to have more electric vehicles on Australian roads, given Chinese manufacturers offer the lowest-cost models.

Matt Hobbs from the Motor Trades Association of Australia said given the rising popularity of Chinese models, the country is set to rapidly grow its presence on Australian roads.

"I could easily see it being the number one source market," he said.

"Three years ago, it was 3 per cent of vehicles. By 2023, nearly 16 per cent of all vehicles were coming from China, the number three source."

He said steps like requiring Chinese car companies to store data from Australian users on-shore might be feasible.

But he said if governments start requiring them to alter the make-up of the cars they send to Australia, that could see Chinese companies pulling out altogether.

"They'll stop sending the cars because it's way too expensive to re-engineer a car with different componentry," he said.

"It's just not something car companies do."

And he said the impacts might not stop at Chinese manufacturers.

"The complications of saying you can't have certain Chinese components associated with communications, or autonomous driving, are huge and widespread and not necessarily obvious," he said.

"Just because the car is built in Germany or in the United States or Korea, it may have those components in it as well.

"The world automotive system is global, and components get sourced from everywhere."

Shares in Chinese car companies rose on Tuesday, shrugging off news of the US ban.

Carmaker BYD was reportedly unconcerned, telling reporters it was "unlikely to have any effect" as the company was focused on Asia, South America and Australia.