US automakers want to permanently shut Chinese cars out of the market

The auto industry wants to turn a temporary barrier into a permanent wall

On 3 September, the Alliance for Automotive Innovation approached US congressional leaders with a demand for a permanent ban on the sale, import and production of China-linked connected vehicles. The ban would also cover high-risk software and hardware. The alliance’s president, John Bozzella, wants Congress to act before the current session ends.

The Alliance for Automotive Innovation argues that Chinese state-backed automakers are rapidly gaining market share in Europe, Australia, Southeast Asia, Mexico and South America. In the alliance’s view, their connected vehicles pose a security risk because they can collect, process and transmit sensitive data.

The US is hardly welcoming to Chinese cars even now. The Biden administration introduced rules for connected vehicles that restrict the use of China- and Russia-linked software and hardware. The purpose of the industry’s current push is to turn such protection into law, so that the next administration could not simply reverse it by executive order.

BYD, Chery and SAIC would be left outside the door

The automakers’ alliance supports, among other measures, the Connected Vehicle Security Act put forward by Senators Bernie Moreno and Elissa Slotkin. The Senate Commerce Committee has already advanced the bill. Its purpose is to enshrine restrictions on Chinese vehicles in federal law.

At the same time, the industry wants to close potential loopholes. According to Reuters, the alliance also wants to prevent exemptions for Chinese manufacturers such as BYD, Chery and SAIC. This is an important detail, because this is no longer merely about high tariffs that would make a Chinese car expensive. The aim is to prevent such cars from reaching the market at all.

Here, security policy very conveniently also becomes industrial policy. A US automaker does not have to compete with a Chinese electric car in the €20,000 or €30,000 price bracket if the competitor is simply not allowed into the showroom.

At the same time, it would be too simplistic to call the entire argument a protectionist pretext. A modern car is no longer merely an engine, a battery and four wheels. Cameras, microphones, location data, driver-assistance systems, mobile connectivity and cloud services turn a vehicle into a major mobile data platform. The question of whose software and servers such a car uses is therefore genuinely strategic.

The ban could also bite Mercedes-Benz

Writing the law will nevertheless prove more difficult than coming up with the slogan. One issue concerns Chinese ownership stakes in Western automakers.

According to Reuters, Senator Ted Cruz has highlighted the possibility that the current wording could inadvertently affect Mercedes-Benz as well, because Chinese investors own a significant stake in the company. The ownership criteria used in the bill therefore still need to be clarified.

This illustrates the paradox of today’s automotive industry. Chinese capital, battery technology, components and manufacturing capacity are deeply embedded in international supply chains. The simple label “Chinese car” no longer adequately describes where one country’s influence begins and ends.

The same issue arises with Volvo, Polestar and other brands whose ownership structure or technical supply chain extends to China. According to Reuters, Polestar has already decided to withdraw from the US market for the 2027 model year.

Europe is conducting exactly the opposite experiment

The European perspective makes the US strategy especially interesting. The European Union has also responded to Chinese state support for electric vehicles, but instead of a blanket market ban it chose additional countervailing tariffs. Chinese manufacturers therefore continue selling in Europe and are investing increasingly heavily in local production.

The US essentially wants to avoid the situation Europe is currently experiencing firsthand. BYD, Geely and other Chinese groups are rapidly pushing new electric and plug-in hybrid models into the European market, with software, standard equipment and value for money that are forcing traditional manufacturers to respond.

China’s export pressure is unlikely to ease in the meantime. According to Reuters, China exported 8.32 million vehicles to more than 200 markets in 2025. Exports could reach 10 million cars as early as 2026.

For Europe, the closing of the US door means even greater pressure. If one of the world’s largest and most profitable automotive markets remains essentially inaccessible to Chinese manufacturers, rapidly growing production capacity will have to find buyers elsewhere. Europe is an obvious target.

Security or fear of competition? Both

There are two entirely understandable strands running through the arguments of US automakers.

The first is security. A connected car collects vast amounts of data, and an increasing number of functions depend on software. The US does not want a strategically sensitive vehicle fleet whose hardware or software is controlled by a geopolitical rival.

The second is economic. In recent years, Chinese automakers have shown that they can develop new models quickly, drive down prices and offer plenty of technology in electric vehicles. Allowing them into the market would force US manufacturers to compete not only with one another, but also with companies whose cost structures, supply chains and state industrial policy are fundamentally different.

This is precisely why it is notable that the auto industry itself, rather than only Washington politicians, is demanding a permanent ban. The alliance effectively represents the core of the US passenger-car industry, and its members include American, European, Japanese and Korean manufacturers.

If Congress passes the legislation sought, an increasingly clear divide will emerge in the global car market. The US will protect its market from Chinese cars with a legal wall, Europe will try to control competition with tariffs, and Chinese manufacturers will seek growth opportunities ever more aggressively across the rest of the world.

The globalisation of the automotive industry will not end, but its previous form is rapidly becoming history.