Mercedes-Benz risks US ban under bill targeting China-linked automakers

By Josh Wingrove, Amy Stillman and David Welch

 

The bill is still far from becoming law and will likely see changes. It’s poised to be combined with a broader package of transportation legislation before receiving a vote on the House floor. It would also need to pass the Senate.

 

Still, the measure’s current construction risks making the iconic maker of German luxury cars a casualty of Washington’s growing push to keep China out of the domestic auto industry. 

A Mercedes spokesperson said in a statement that the company has and will continue to work in good faith with lawmakers to ensure that any legislation allows the company to serve its US customers, dealers, employees and suppliers. 

 

 

Representatives for the White House and House Speaker Mike Johnson didn’t immediately respond to requests for comment.

 

The automaker is in talks with government officials to find a solution, said a person familiar with the matter who requested anonymity because the discussions are private.

 

The legislative provision effectively bans companies from the US based on certain thresholds, such as whether they are more than 15 per cent owned by a foreign entity.

 

And although the bill contains exemptions for companies that already produce and sell vehicles in the US, those don’t extend to companies with equity stakes held by state-owned enterprises. CNBC earlier reported on the potential consequences for Mercedes.

 

Nearly 10 per cent of the German automaker’s stock is owned by China’s BAIC Motor Corp., a state-owned carmaker. Li Shu Fu, the billionaire founder and chairman of Chinese carmaker Geely, also holds nearly 10 per cent of Mercedes’ equity, potentially pushing the company above that 15 per cent threshold targeted by the provision of the bill, called the Motor Vehicle Modernization Act.

 

The situation highlights the difficulty of legislative and regulatory efforts to insulate the US from Chinese carmakers. Those companies are rapidly growing sales around the world and have long-established ties with many major Western auto companies.

 

Mercedes for decades has been one of the top-selling luxury car brands in America. The company employs thousands of people and has assembled vehicles in the US since the 1990s in Alabama, a state friendly to US President Donald Trump. 

 

The company’s factory in Tuscaloosa has produced more than 4.5 million vehicles and today serves as a major hub for the carmaker’s sport-utility vehicle production, with about two-thirds of the factory’s output being exported.

 

Potentially ensnaring a company with such deep US roots highlights a groundswell of concern in Washington about the risks that China’s automakers pose to the domestic car industry. Those fears have grown since Trump in January suggested he’d welcome Chinese companies so long as they built US auto factories and hired Americans. 

 

The comment stoked unease within the domestic industry, which has urged administration officials to keep Chinese cars out. Ford Motor Co. Chief Executive Officer Jim Farley recently said failing to do so would be “devastating” to domestic manufacturing.

 

Trump administration officials have recently downplayed the likelihood of China’s arrival in the near term.

 

Earlier this week, the Commerce Department agreed to exempt Volvo Car AB from a policy banning connected vehicles with ties to China starting in the 2027 model year. The company is majority-owned by China’s Geely, headquartered in Sweden and has factories around the world, including in South Carolina.

 

Republicans and Democrats in the House and Senate are pushing to take the Commerce Department’s restrictions even further.

 

Senators Elissa Slotkin of Michigan and Bernie Moreno of Ohio — a Democrat and Republican representing longtime auto-producing strongholds — have introduced a bill that bans the production, importation, sale or resale of connected vehicles, software and hardware linked to China and other foreign adversaries, citing national security risks.

 

Michigan Representatives Debbie Dingell and John Moolenaar, the Republican chair of the House Select Committee on China, introduced a similar bill in the House earlier this month.

 

In a recent interview, Slotkin said her bill was proposed because Chinese vehicles, with their connected software, are surveillance packages on wheels. She also said China unfairly advantages its domestic carmakers, including through massive subsidies. 

 

She and Moreno want to permanently enshrine the Commerce Department’s ban into law to prevent Trump or any future administration from simply wiping it away in the future.

 

“Because of what we were hearing coming out of the White House, we felt the need to turn it into law,” Slotkin said in an interview earlier this month at the Detroit Regional Chamber. “This isn’t pulled out of thin air. The president has been leaving breadcrumbs on this issue, so we just felt the need to do a bipartisan bill.”