NextFin News - A legislative push in Washington to purge Chinese influence from the American automotive supply chain has inadvertently placed one of Germany’s most iconic brands in the crosshairs. Mercedes-Benz, which has operated a massive manufacturing footprint in Alabama for nearly three decades, could be barred from the U.S. market under the Motor Vehicle Modernization Act of 2026. The bill, currently moving through the House of Representatives, contains ownership clauses so restrictive they may force the Stuttgart-based automaker to choose between its largest shareholders and its second-largest global market.
The tension centers on a provision in the bill that prohibits any automaker with "direct or indirect equity interest by a foreign-adversary government" from manufacturing or selling vehicles in the U.S. While the legislation includes a general exemption for established domestic manufacturers, that protection explicitly vanishes if a "foreign adversary"—a list that includes China—holds any stake. Mercedes-Benz’s largest individual shareholder is BAIC Group, a state-owned Chinese automaker that holds a 9.98% stake. Because BAIC is an arm of the Chinese government, the "any interest" language in the current draft acts as a tripwire that could trigger a total ban on Mercedes-Benz operations within five years of enactment.
The legislative net extends even further through a secondary "control" definition. The bill targets companies where a "person or combination of foreign persons" from an adversary nation holds a 15% stake. Beyond BAIC’s state-owned shares, Chinese billionaire Li Shufu, the founder of Geely, owns 9.69% of Mercedes-Benz through his investment vehicle, Tenaciou3 Prospect Investment. Together, these two Chinese entities control 19.67% of the German group. While Li is a private entrepreneur, the combined weight of Chinese capital in Mercedes-Benz’s cap table makes the company a primary target for lawmakers wary of Beijing’s reach into American infrastructure.
The stakes for the U.S. economy are substantial. Mercedes-Benz employs more than 11,000 people in the U.S. and has produced over 4.5 million vehicles at its Tuscaloosa, Alabama, plant since 1997. Last year alone, the company sold more than 315,000 vehicles to American consumers. A forced exit would not only disrupt the luxury car market but also jeopardize a multi-billion dollar industrial ecosystem in the American South. According to people familiar with the matter who spoke to CNBC, the language in the bill is "unambiguous," suggesting that unless the text is amended to include a de minimis threshold for state ownership, the German giant is legally indistinguishable from a Chinese state-backed enterprise in the eyes of the proposed law.
This legislative hawkishness reflects a broader bipartisan consensus under U.S. President Trump to decouple the domestic auto industry from Chinese technology and capital. John Bozzella, CEO of the Alliance for Automotive Innovation, recently characterized China’s ambition to dominate global manufacturing as a "clear and present danger." However, the industry group, which represents nearly every major automaker in the U.S., has signaled that "details matter," hinting at the need for surgical precision to avoid "unintended consequences" for European allies. The challenge for Mercedes-Benz is that its corporate structure was built for a globalized era that is rapidly being dismantled by national security mandates.
The precedent for such a standoff was set by the forced restructuring of TikTok, where a mix of U.S. and international investors took control to satisfy Washington’s security concerns. For Mercedes-Benz, a similar path would require BAIC to divest its entire stake or for the U.S. government to grant a specific national security waiver. Volvo, which is majority-owned by Geely, recently secured a narrow authorization to bypass certain software bans, but the Motor Vehicle Modernization Act represents a much broader existential threat to the right to operate. As the bill moves toward a potential House vote, the German government and Mercedes-Benz executives face a narrowing window to lobby for a "carve-out" that recognizes the distinction between a Chinese-owned brand and a global firm with Chinese minority investors.
Explore more exclusive insights at nextfin.ai.
