• A bipartisan Senate effort to enshrine restrictions on Chinese-connected vehicles into law has been postponed until November after a key Republican senator raised objections.
  • Sponsors are negotiating changes to a draft that could inadvertently bar Mercedes-Benz (MBG.DE) from the U.S. market due to its Chinese shareholder base.
  • The measure aims to replace and expand existing Commerce Department rules, adding Iran and North Korea to the list of covered countries.

Unanimous Consent Hurdle

A push to give Congress a durable statutory ban on connected vehicles linked to China and other adversaries has hit a snag in the Senate. Republican Sen. Bernie Moreno of Ohio and Democratic Sen. Elissa Slotkin of Michigan had planned to seek fast-track approval last week but pulled back after Sen. Rand Paul, Republican of Kentucky, objected, according to aides familiar with the matter. Under Senate rules, a single senator can block unanimous consent, and Paul has signaled he will not allow the bill to proceed without changes.

The legislation, S. 4429, the Connected Vehicle Security Act of 2026, was placed on the Senate legislative calendar on September 22 after clearing the Commerce Committee. It seeks to convert existing executive-branch restrictions on Chinese-connected vehicles into a permanent statutory prohibition. The current Commerce Department rule, which took effect March 17, 2025, bars software from China- and Russia-linked entities beginning with model year 2027 and hardware starting with model year 2030. The bill would expand that to cover Iran and North Korea, and add certain AI components.

The Mercedes-Benz Flashpoint

The immediate sticking point is an unintended consequence: a provision that would bar automakers with more than 15% Chinese ownership from selling vehicles in the U.S. Reuters reports that Chinese entities hold nearly 20% of Mercedes-Benz shares on a passive basis. That has turned the German luxury carmaker into an unlikely focal point of the debate.

Mercedes-Benz is not accused of being a Chinese automaker, but the ownership threshold as drafted could sweep in the company anyway. Moreno has said the intent is not to exclude Mercedes-Benz and that talks are ongoing to adjust the language. Paul has called the provision an unfair, company-specific attack and suggested that removing it could unlock the bill’s path.

“We are working to ensure the bill targets the actual risk without penalizing allied manufacturers,” a Senate aide said, speaking on condition of anonymity to discuss the negotiations.

The dispute underscores a broader challenge: global automakers are often financially intertwined with China, whether through equity stakes, manufacturing footprints, or component sourcing. A blunt ownership test risks capturing established Western brands alongside the intended targets.

Policy and Market Implications

The bill reflects growing concerns that connected vehicles—equipped with software, sensors, and communications systems that can collect and transmit sensitive data—pose a national-security risk if linked to foreign adversaries. The Commerce Department’s rule explicitly framed the restrictions as protection against such vulnerabilities. By legislating the ban, Congress would make it harder for a future administration to waive or reverse the policy as part of trade negotiations.

While Chinese-branded passenger vehicles have little direct U.S. market presence today, the legislation could have longer-term effects on EV competition and pricing. Domestic automakers and suppliers might benefit from reduced competition, but global manufacturers could face higher compliance costs. Consumers could see fewer low-cost EV options down the road.

Bipartisan Support, But a Narrow Window

The bill enjoys unusual bipartisan backing—Moreno and Slotkin lead the effort, and Reuters reports it had 51 Senate supporters earlier. A House companion has attracted more than 100 co-sponsors. Sponsors had hoped for full enactment this year, but the Senate delay pushes the timeline to November, when lawmakers return from recess.

Slotkin said Democrats remain committed to moving forward, and Paul is the key holdout. If unanimous consent fails again, sponsors could pursue a regular Senate vote or attach the measure to broader legislation.

Meanwhile, the diplomatic backdrop is delicate. The initial fast-track push coincided with President Trump’s meeting with Chinese President Xi Jinping, where trade issues were on the agenda. China has opposed both the existing restrictions and efforts to make them permanent.

For now, the Senate effort is not abandoned—just rerouted. Sponsors are negotiating revisions in hopes of securing unanimous consent before the Senate leaves for its October recess. Whether they can thread the needle on Mercedes-Benz will determine if the bill moves this fall or slips into next year.

Update: This article was updated to clarify that the Senate Commerce Committee version would restrict automakers with more than 15% Chinese ownership, and that Chinese entities hold nearly 20% of Mercedes-Benz shares on a passive basis.