European automakers helped build China’s car industry, as America tries to ban Chinese cars without hitting European brands

Washington faces the European problem

Washington is trying to block Chinese-connected vehicles without sweeping European brands into the restriction. Senators Bernie Moreno and Elissa Slotkin plan another attempt in November after Senate action stalled on September 30.

Their proposal would make existing federal restrictions harder to reverse. Senator Rand Paul objected because the ownership language could affect Mercedes-Benz, a German automaker with substantial passive investment from China.

Moreno said lawmakers would adjust the legislation so Mercedes could remain in the U.S. market. The ownership provision remains the main issue.

Mercedes exposes the ownership issue

The Mercedes problem comes from corporate ownership rather than the country where its vehicles were designed. The Senate measure would restrict vehicle companies with more than 15% Chinese ownership from selling in the United States.

Mercedes-Benz has nearly 20% passive Chinese ownership. BAIC holds 9.98%, while an investment vehicle controlled by Geely founder Li Shufu holds another 9.69%.

Moreno said lawmakers did not intend to exclude Mercedes from America. Paul objected to moving the legislation forward while the Mercedes issue remained unresolved.

Geely connects more European brands

That ownership question extends beyond Mercedes-Benz. China’s Geely Holding acquired Volvo Cars from Ford for $1.8 billion in 2010. The deal placed the Swedish automaker under Chinese ownership.

Geely also has a major investment in British sports car maker Aston Martin. Another British automaker, Lotus, has an even stronger connection because Geely controls 51% of the Lotus Group.

These ownership structures can bring established European brands within the scope of rules based on Chinese corporate investment.

Polestar shows the U.S. impact

Polestar illustrates how America’s connected-vehicle restrictions can affect U.S. vehicle availability. On June 25, 2026, the Swedish EV company announced a Commerce Department decision that would affect its future operations in the United States.

The decision prevents Polestar from selling new vehicles in America under the current Connected Vehicle Rule from model year 2027 onward.

Existing U.S. inventory of the Polestar 3 and Polestar 4 can continue being sold. Polestar also promised continued service support for existing owners. The company later began restructuring its U.S. operations.

Federal rules target vehicle technology

The Polestar decision rests on a federal rule finalized before the current Senate fight. On January 14, 2025, the Commerce Department finalized restrictions covering certain connected vehicle technology linked to China or Russia.

Restrictions involving covered software begin with model year 2027. Hardware restrictions start with model year 2030. Covered hardware without an associated model year faces restrictions beginning January 1, 2029.

The regulations also cover certain manufacturers with ties to China or Russia. Commerce cited risks involving sensitive information and remote vehicle manipulation.

Ford warns America about Europe

Ford CEO Jim Farley connected America’s current debate with Europe’s experience on September 29, 2026. Speaking at an Automotive News event, Farley said Europe was “too late” in responding to competition from Chinese automakers.

Farley urged caution about allowing Chinese automakers into the United States. Ford still works with Chinese companies when specific technology or partnerships support its business strategy.

Ford’s BlueOval Battery Park, Michigan, uses LFP battery technology licensed from China’s CATL. Ford has also formed a planned manufacturing joint venture with Geely in Europe. Those relationships continue while Ford competes with Chinese automakers.

Volkswagen entered China decades ago

Europe’s industrial connection with China’s car market began decades before today’s EV competition. Volkswagen started negotiations with Chinese officials in 1978 as the German company explored local vehicle production.

The first China-built Volkswagen Santana rolled off the Anting production line on April 11, 1983. Shanghai Volkswagen began operations in 1985. FAW Volkswagen followed in Changchun in 1991.

Volkswagen describes itself as a pioneer in China’s automotive development. Its joint ventures established a long-term manufacturing presence in the country.

China now supplies technology back

Four decades later, Volkswagen’s Chinese operations include substantial local technology development. In 2024, the company said it operated 39 plants in China and employed about 90,000 people.

Volkswagen also committed €2.5 billion to expand its Hefei innovation hub. Its strategy increasingly relies on local development and partnerships with Chinese technology companies, including XPeng.

Volkswagen says its localized development structure can reduce vehicle development time by around 30%. It’s China Electrical Architecture, developed with Chinese partners including XPeng, and is also becoming part of the company’s local vehicle strategy.

GM develops new vehicles in China

The technology shift extends beyond European companies. Reuters reported on July 7, 2026, that established global automakers increasingly rely on Chinese engineering operations to develop vehicles and automotive technology.

General Motors provides an American example through its partnership with SAIC-GM. The Buick Electra E7 was developed entirely in China using the locally developed Xiao Yao vehicle platform.

The platform supports a 900-volt charging architecture. GM has also planned to use Chinese-developed vehicle architectures for additional products.

Stellantis deepens its China ties

Stellantis provides another example of European and Chinese automotive technology becoming intertwined. In 2023, Stellantis agreed to invest about €1.5 billion in Leapmotor and later held approximately 21% of the Chinese automaker.

Leapmotor International is controlled 51% by Stellantis and 49% by Leapmotor. The venture holds rights to sell and manufacture Leapmotor products outside Greater China. Another connection emerged in September 2026.

Momenta and Dongfeng Stellantis Automotive Technology signed a partnership agreement to develop driver-assistance systems for future Jeep and Peugeot production vehicles.

China’s EV scale drives the pressure

China’s manufacturing scale helps explain why Western automakers continue seeking Chinese technology.

The International Energy Agency says almost 22 million electric cars were produced worldwide during 2025. China accounted for nearly 75% of that production. Chinese electric car exports also doubled during the year, exceeding 2.5 million vehicles.

China also produced more than 80% of global battery cells in 2025. That manufacturing base supports its growing role in electric vehicle technology and production.

Europe chose a different response

Europe has responded to Chinese electric vehicles differently from Washington. The European Union is imposing countervailing duties on battery-electric vehicles imported from China following the bloc’s investigation into subsidies.

EU electric car imports increased about 35% during 2025 and exceeded 900,000 vehicles, according to the International Energy Agency. Chinese brands represented more than 70% of electric cars imported from China.

Europe continues to receive Chinese-built EVs while imposing trade duties. U.S. connected vehicle restrictions instead focus on technology and corporate relationships.

Mercedes bets on the CLA after Europe names it Car of the Year, highlighting how another European automaker is competing through new products while navigating a different regulatory environment.

Washington must define the boundary

The remaining question for Washington is how broadly future restrictions should define Chinese control of the automotive sector. Existing Commerce rules examine corporate relationships alongside covered vehicle software and connectivity hardware.

Volvo Cars received specific authorization from Commerce on May 26, 2026. The decision allowed the Swedish automaker to continue U.S. imports and sales under the Connected Vehicle Rule.

Polestar received a different regulatory outcome. The two cases show how existing U.S. rules can yield different outcomes for European automakers with ties to China.

Polestar 3 production set to consolidate in South Carolina shows how U.S. manufacturing has become part of Polestar’s response to regulatory and trade pressures.

Can the U.S. block Chinese cars without disrupting European automakers tied to China? Share your views in the comments.

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This slideshow was made with AI assistance and human editing.