A proposed U.S. crackdown on Chinese influence in the auto industry has produced an unexpected complication: Mercedes-Benz, one of the world’s best-known German brands, could technically be caught by the same ownership rule designed to keep Chinese automakers out of the American market.
Republican Senator Bernie Moreno said on September 29 that discussions are continuing to prevent that outcome as lawmakers try to advance the Connected Vehicle Security Act of 2026. The proposal uses a 15% Chinese ownership threshold, while Mercedes-Benz has two major Chinese-linked shareholders whose disclosed holdings total nearly 20%. At the same time, Canada is moving in a different direction, allowing a controlled quota of Chinese-made electric vehicles into its market at a 6.1% tariff. Together, the developments show how rapidly North America’s auto policies toward China are beginning to diverge.
Mercedes Has Become the Bill’s Most Visible Edge Case
Mercedes-Benz was never supposed to be the primary target of Washington’s latest effort to restrict Chinese vehicles. The Connected Vehicle Security Act is aimed principally at preventing Chinese-controlled automakers and connected-vehicle technologies from gaining a significant foothold in the United States. Yet the ownership language approved by the Senate Commerce Committee creates a much wider net. Companies whose vehicle operations cross the legislation’s Chinese ownership or control threshold could face restrictions even if their headquarters, factories and brand identities are outside China.
That is why Moreno’s latest comments matter. He said discussions are continuing specifically to make sure Mercedes vehicles are not pushed out of the American market. The senator made clear that banning Mercedes is not the intended result, while acknowledging the practical question of whether the company could reduce its Chinese ownership below the proposed threshold without creating serious corporate complications. The debate has therefore shifted from a relatively straightforward ban on Chinese automakers to a more complicated question about global companies with minority Chinese investors.
The 15% Rule Collides With Mercedes’ 19.67% Known Chinese Stakes
Mercedes-Benz’s own shareholder disclosures explain why the legislation has become complicated. As of June 30, 2026, BAIC Group held 9.98% of Mercedes-Benz Group’s registered share capital. Investor Li Shufu held another 9.69% through Tenaciou3 Prospect Investment Limited. Combined, those disclosed stakes amount to 19.67%, comfortably above the 15% threshold contained in the Senate bill for certain connected-vehicle manufacturers linked to covered countries.
The proposed rule is also broader than a simple test of whether one Chinese shareholder owns more than 15%. The reported Senate text looks at more than 15% of equity interest, voting interest, board representation or other indications of control, whether held directly or indirectly by one entity or a combination of entities linked to a covered country. That distinction is crucial for Mercedes. Neither disclosed Chinese investor individually crosses 15%, but their combined holdings do. Exactly how that structure would be treated under final legislation is therefore one of the issues lawmakers and the company have reason to resolve before the bill becomes law.
Mercedes’ U.S. Manufacturing Footprint Makes the Question Bigger
Treating Mercedes as simply another foreign automaker would overlook how deeply the company is embedded in American manufacturing. Its Alabama operation employs roughly 5,800 people and produces vehicles including the GLE, GLS and GLE Coupe, along with several electric SUVs. Mercedes says more than five million vehicles have been assembled at its Alabama operation since production began in 1997, and roughly 60% of the SUVs made there are exported to markets around the world.
The company also manufactures vans in South Carolina. Its Charleston operation employs more than 1,600 people and assembles Sprinter and electric eSprinter vans for North America. That makes the ownership issue more politically and economically complicated than blocking a Chinese brand with no American factories. Restrictions affecting Mercedes could touch assembly workers, American suppliers, dealerships and export production. This helps explain why lawmakers who support tougher barriers against Chinese automotive companies have simultaneously said they do not intend for the legislation to drive Mercedes out of the United States.
The Proposal Targets Connected-Vehicle Technology, Not Just Imports
The Connected Vehicle Security Act goes considerably further than imposing another tariff at the border. The Senate-reported version would restrict the importation, manufacturing, sale, resale or introduction into U.S. interstate commerce of connected vehicles tied to designated foreign adversaries. It also establishes restrictions covering software and vehicle-connectivity hardware, reflecting Washington’s growing focus on the huge quantities of data modern cars can collect and transmit.
That matters because a modern vehicle is increasingly a network of cameras, cellular connections, Bluetooth modules, satellite links and software rather than a purely mechanical product. Under the bill, covered software and connectivity systems linked to designated countries can trigger restrictions independently of where the final vehicle is assembled. Supporters describe that approach as a national-security safeguard against data extraction or remote manipulation. The practical effect, however, is that automakers must examine not only where a car is built but also who owns the manufacturer, who designed important software and where critical communications components originate.
Existing U.S. Rules Already Start Biting in Model Year 2027
Congress is not starting with a blank sheet. The U.S. Commerce Department finalized connected-vehicle restrictions in January 2025 targeting certain technologies with a sufficient connection to China or Russia. Those rules cover passenger vehicles under 10,001 pounds and focus on vehicle-connectivity systems and automated-driving software that could potentially provide access to sensitive information or vehicle functions.
The timeline is deliberately staggered. Restrictions involving covered software and connected vehicles produced by manufacturers with the relevant China or Russia nexus begin with model year 2027. Hardware restrictions generally take effect for model year 2030, or January 1, 2029, for certain equipment without a model year. Congress is now trying to put stronger restrictions into statute rather than relying exclusively on executive-branch regulations. That would make the policy harder for a future administration to reverse or waive broadly. It also explains why automakers are paying close attention now even though several of the most significant supply-chain requirements are still years away.
The 2030 Runway Is Central to the Mercedes Negotiations
The ownership threshold would not necessarily require Mercedes to make a dramatic change overnight. Moreno has previously said the automaker would have until 2030 to address its ownership situation, and the reported Senate bill contains delayed implementation provisions for certain existing U.S. manufacturers and operators. Companies relying on that transition would have to outline plans for reaching compliance rather than continuing indefinitely under the old structure.
There is also an authorization mechanism. The Commerce Department could approve otherwise restricted vehicles, software or hardware after determining that they do not pose an undue risk of data extraction, remote manipulation, critical-infrastructure problems or other national-security dangers. The process requires a written assessment and congressional notification, meaning it is more involved than a simple administrative exemption. For Mercedes, that creates several possible paths: changes to the legislation itself, changes to the company’s shareholder structure, use of the transition period or potentially a specific authorization. The ongoing talks appear focused on preventing an unintended market ban while preserving the legislation’s broader restrictions.
Rand Paul Is Holding Up the Fast-Track Route
The immediate obstacle is not a lack of support for restricting Chinese vehicles. It is the Senate procedure being used to move the legislation quickly. Moreno and Democratic Senator Elissa Slotkin have been attempting to advance the measure through unanimous consent, a route that can move legislation rapidly but allows a single senator to stop the process by objecting.
Republican Senator Rand Paul has emerged as the key holdout. He told Reuters that he viewed the ownership provision as an unfair attack on Mercedes-Benz and indicated that removing the problematic language could clear the way for the bill. Slotkin said last week that her understanding was that support effectively stood at 99 senators to one, although the legislation has not received a recorded 99-1 vote. Moreno said on September 29 that talks with Paul were continuing as he sought fast-track approval before the Senate leaves Washington until November. Blocking unanimous consent does not automatically defeat the legislation, but it complicates the sponsors’ effort to move it quickly.
The Bill Still Has Unusually Broad Bipartisan and Industry Support
Despite the dispute over Mercedes, the broader Chinese-vehicle restrictions have attracted support from lawmakers in both major U.S. parties. The Senate Commerce Committee advanced the Connected Vehicle Security Act unanimously in July, and the reported version of S. 4429 was placed on the Senate legislative calendar in September. Reuters reported last week that the measure had 51 Senate supporters and that the companion effort in the House had accumulated more than 100 co-sponsors.
Support also extends across significant parts of the American auto sector. General Motors, Ford, Stellantis, Honda, the Alliance for Automotive Innovation and major labour organizations have expressed support for the policy or its overall objectives. Their reasons combine national-security concerns with industrial competition. Chinese automakers have expanded rapidly in other global markets, while Chinese companies have developed strong positions in EV batteries, electronics and connected-vehicle technology. The Mercedes debate therefore represents a dispute over how the restrictions should be written, rather than a simple partisan divide over whether Chinese automotive influence should face additional U.S. barriers.
Volvo, Aston Martin and Lotus Show the 15% Rule Reaches Beyond Mercedes
Mercedes is receiving most of the attention because of its size and American footprint, but it is not the only established European brand potentially affected by the proposed ownership rules. Moreno said discussions are also taking place over how Volvo Cars could continue selling vehicles in the United States. Volvo is majority owned by China’s Geely Holding, putting its ownership structure much closer to the centre of the legislation’s intended restrictions.
Reuters also reported that Aston Martin, in which Geely holds roughly 17%, and Lotus, which is majority owned by Geely, could encounter problems under the proposed legislation. Those examples demonstrate why a fixed ownership threshold can have consequences beyond brands traditionally described as Chinese. Global automotive capital has become heavily interconnected, with Chinese investors taking significant positions in European automakers while Western manufacturers rely on Chinese suppliers, batteries and technology. A law based partly on ownership percentages therefore forces policymakers to decide where Chinese investment ends and Chinese control begins—a distinction that is not always obvious from the badge on a vehicle.
Canada Has Chosen Managed Market Access Instead
While Washington tries to harden barriers, Ottawa has moved toward controlled re-entry for Chinese-made EVs. Canada’s agreement with China provides an initial annual quota of 49,000 electric vehicles that can enter at the normal 6.1% most-favoured-nation tariff. The quota took effect on March 1, 2026, replacing the 100% surtax Canada had imposed on Chinese EVs beginning in October 2024.
Calling the policy an unrestricted opening would be misleading. Importers need shipment-specific permits from Global Affairs Canada, and vehicles cannot simply continue entering once the annual quota is exhausted. Ottawa has described the framework as managed market access intended to introduce competition while keeping volumes predictable for Canada’s domestic industry. The initial 49,000-unit ceiling represents less than 3% of Canada’s new-vehicle market, according to federal regulatory documents. Nevertheless, the policy clearly differs from the direction being pursued in Washington, where lawmakers are seeking to make Chinese vehicle restrictions more permanent and broader in scope.
Canada’s 49,000-Vehicle Cap Is Designed to Grow Gradually
Canada’s quota is not fixed permanently at 49,000 vehicles. The agreement provides for the volume to increase by 6.5% annually, creating a gradual expansion in permitted Chinese-made EV imports if the policy remains in place. During the first quota year, running from March 1, 2026, through February 28, 2027, the government divided access into two six-month periods.
The first period covered 24,500 vehicles between March and August. Another 24,500 were made available for the September-to-February period, along with unused capacity carried forward from the first six months. The system is currently administered on a first-come, first-served basis for eligible original equipment manufacturers, although Global Affairs Canada has reserved the ability to manage access to ensure opportunities for different manufacturers and new entrants. That structure gives Ottawa considerably more control than simply eliminating its tariff barrier. It can monitor volumes, control permits and adjust administration while still giving Chinese-built vehicles a pathway back into the Canadian market.
Only About a Third of the First-Year Canadian Quota Had Been Used by Sept. 25
The strongest evidence that Canada has not yet been overwhelmed by Chinese EV imports comes from the government’s own quota tracking. Data updated September 25 showed that 15,763 vehicles had been counted against the 49,000-unit first-year quota. That left 33,237 units still available, meaning only about 32% of the annual allowance had been utilized roughly seven months into the quota year.
Most of that activity occurred before September. The government recorded 15,603 units during the first six-month period from March through August, followed by another 160 units in September as of the data update. Those numbers provide useful context for the political debate. Canada has legally reopened a route for Chinese-made EVs, but the existence of a 49,000-unit ceiling does not mean all 49,000 vehicles immediately appeared at dealerships. Brand launches, vehicle certification, shipping arrangements, dealer networks and consumer demand still determine how quickly the quota translates into cars on Canadian roads.
Affordable EVs Are Built Into Canada’s Quota Design
Affordability is not merely an indirect goal of the Canadian framework; it becomes an explicit part of the quota. Beginning in year two, 10% of the allowable volume is to be reserved for vehicles with a free-on-board value of C$35,000 or less. That share is scheduled to rise until 50% of the quota is reserved for vehicles at or below the threshold in year five.
Interestingly, lower-priced vehicles were already appearing in the utilization data before the mandatory reserve begins. During the first six-month period, federal records counted 7,805 fully electric passenger vehicles in the C$35,000-or-less customs category, alongside 7,495 fully electric passenger vehicles in a category above C$35,000, plus smaller volumes in other classifications. The C$35,000 figure should not be confused with a guaranteed Canadian dealership sticker price because the quota uses an import-value measure. Still, Ottawa’s policy is explicitly structured to push a growing portion of future quota access toward lower-value EVs rather than allowing the entire allocation to be absorbed by expensive models.
Ottawa’s China Deal Was Also About Agriculture and Investment
The EV decision was part of a much broader Canada-China trade arrangement. Ottawa linked the new vehicle quota to improved Chinese market access for Canadian agricultural and seafood exports. Federal documents say China reduced the combined tariff facing Canadian canola seed to roughly 15%, down from about 84%, while other products including canola meal, lobster, peas and crab received additional tariff relief during 2026. Canadian officials have put the annual value of canola seed exports potentially benefiting from improved access at about C$4 billion.
Ottawa has also said it expects the EV arrangement to encourage Chinese joint-venture investment with Canadian partners and support the domestic EV supply chain. That investment is an expectation, not a guaranteed outcome. Canadian auto groups and Unifor have challenged the strategy, arguing that increased imports could threaten assembly and parts employment without binding commitments to manufacture vehicles in Canada. Dealer representatives have also sought greater clarity around which manufacturers will receive access. The disagreement therefore involves competing industrial priorities as much as vehicle prices.
North America Is Developing Two Very Different China-Auto Playbooks
The emerging split is broader than one Mercedes ownership dispute. Canada is using quotas, permits and tariffs to allow a limited number of Chinese-made EVs into its market while hoping to gain lower consumer prices, agricultural trade benefits and future investment. The United States is moving toward ownership tests, software restrictions and hardware rules intended to prevent Chinese automotive companies and technology from becoming embedded in its market. Both systems are restrictive, but they start from very different assumptions about how much Chinese participation should be permitted.
Washington is already considering how Canada’s decision could affect cross-border movement. Slotkin and Representative Haley Stevens have separately proposed legislation that would restrict certain Chinese connected vehicles from entering the United States through Canada or Mexico, illustrating how national vehicle policies can spill across borders. Meanwhile, Mercedes negotiations continue around S. 4429, and Canada’s second quota period runs through February 28, 2027. The next decisions will determine whether the North American auto market remains broadly coordinated on China or develops increasingly different rules on opposite sides of the border.
