Washington is trying so hard to keep Chinese automakers out of America that it might end up banning Mercedes-Benz instead.
It sounds wild, but it's happening right now in the US Senate. A bipartisan bill introduced by Senator Bernie Moreno, a Republican from Ohio who used to sell Mercedes cars, and Senator Elissa Slotkin, a Democrat from Michigan, sets a strict boundary. Any company making connected vehicles that has more than 15% Chinese ownership could be blocked from selling cars in the United States.
There's just one problem. Mercedes-Benz is roughly 20% Chinese-owned.
State-owned BAIC Group owns nearly 10% of the German automaker. Li Shufu, the billionaire founder of Geely, owns another 9.7%. Add those up, and Mercedes easily clears the 15% line that Capitol Hill wants to draw in the sand.
If this legislation passes in its current form, one of the most iconic luxury carmakers on the planet could face a ban on selling new vehicles in its most profitable market.
How Washington Got Here
The bill, known as the Connected Vehicle Security Act of 2026, builds on earlier Commerce Department rules designed to keep foreign tech out of American cars. Lawmakers are worried about modern cars acting as wiretaps. Today's EVs and luxury sedans carry dozens of sensors, exterior cameras, GPS tracking, and always-on cellular connections.
Washington officials worry that hostile governments could pull data from those vehicles or remotely interfere with their software. Senator Slotkin called modern Chinese cars "surveillance packages on wheels."
That concern makes sense when talking about state-subsidized brands entering North America from China. But applying a blunt equity threshold to global brands creates huge unintended collateral damage.
Mercedes isn't controlled by Beijing. The company has repeatedly pointed out that no single shareholder owns more than 10% of its stock. Neither BAIC nor Li Shufu holds a seat on the supervisory board. They don't direct product strategy, software development, or corporate decisions. Yet because lawmakers wrote a numerical cutoff into the draft text, minority equity stakes are suddenly treated as an existential threat to US security.
The Massive Alabama Footprint Capitol Hill Is Ignoring
Mercedes isn't some distant importer dropping cars onto US docks. The brand has been building vehicles on American soil since 1997.
Its sprawling assembly plant in Tuscaloosa, Alabama, has turned out over five million vehicles. Mercedes recently committed another $4 billion to upgrade that facility through 2030 for electric vehicle production. The company operates a second plant in South Carolina to build commercial vans. All told, Mercedes directly and indirectly supports roughly 160,000 American jobs across manufacturing, component supply chains, and dealership networks.
Banning Mercedes from selling cars in the US wouldn't just hurt executives in Stuttgart. It would crater local economies in the American South.
Company lobbyists are spending millions on Capitol Hill trying to explain this reality to lawmakers. Mercedes wants the Senate to raise the foreign ownership cap to 25%, matching the limit proposed for tier-one component suppliers. Alternatively, Mercedes is asking lawmakers to toss out the raw ownership percentage and replace it with a risk assessment that looks at actual operational control.
Everyone Is Mad at Mercedes Right Now
Lobbying Washington rarely comes without political blowback, and Mercedes is taking hits from every angle.
The House Select Committee on China recently blasted the automaker on social media, publicly calling out "this German-based, Chinese-owned company" for trying to shape US policy. Former White House officials and union leaders have joined the chorus, arguing that giving any ground to Mercedes creates a massive loophole that Chinese firms will exploit.
Meanwhile, competitors are watching closely. Geely-owned Polestar already announced it will stop selling new vehicles in the US market after missing out on regulatory exemptions under separate connected vehicle rules. Volvo Cars, also owned by Geely, managed to secure a safe harbor clause due to prior arrangements with federal agencies.
Mercedes is caught in the middle. It doesn't have the grandfathered protections Volvo secured, yet it carries far too much weight in the US economy to accept a Polestar-style exit.
The Technical Nightmare of Battery Software
The legislative fight isn't just about who owns shares of stock. It's also about what goes inside the cars.
The Senate bill targets battery management systems imported from suppliers like CATL, the global battery giant based in China. Modern EV batteries rely on complex internal electronics to regulate charging rates, track thermal output, and maintain safety thresholds.
Some policy experts argue that if an adversary controls the microcontrollers inside a high-voltage pack, they could theoretically push those battery cells past thermal limits, causing sudden fires. That concern has prompted senators to demand strict bans on imported Chinese battery hardware and embedded software.
Because Mercedes relies heavily on global battery suppliers for its EQ electric fleet, replacing those supply lines before proposed deadlines in 2027 and 2030 presents a massive logistical hurdle. Automakers can't redesign vehicle architecture or swap battery suppliers overnight. Re-engineering a car platform takes three to five years and costs billions.
What Happens If the Senate Bill Passes
Existing automakers operating inside the US would likely have until 2030 to fix their equity structures or secure regulatory waivers under the Senate proposal. That gives Mercedes a small window to navigate the situation, but the options aren't cheap or easy.
- Forced Share Buybacks: Mercedes or friendly Western institutional investors could try to buy back shares from BAIC or Li Shufu to push Chinese equity below 15%. However, neither investor has expressed any desire to sell, and forcing a buyback would require significant capital.
- Corporate Restructuring: Mercedes could attempt to isolate its US entity into a standalone subsidiary with zero direct ties to foreign equity, though regulators might still look through the parent company structure.
- Lobbying for Exemption Clauses: The most likely short-term outcome is that lawmakers add a qualitative national security review. This would allow the US government to evaluate whether an automaker's foreign shareholders actually exercise operational control over vehicle software and user data.
Congress needs to protect national security without dismantling global manufacturing partnerships that employ tens of thousands of American workers. Treating a 9.9% non-voting share in a German automaker the same as direct operational control by a foreign government isn't smart security policy. It's a blunt instrument that misses the mark.
If you're watching the auto industry, keep an eye on the Senate Commerce Committee votes this week. How lawmakers handle the 15% threshold will tell you whether Washington is serious about practical cybersecurity or just eager to pass headline-grabbing trade bans.
