How Washington Pressures European Carmakers to Cut China Ties

European carmakers are facing mounting US pressure over their trade and investment ties with China, as Washington seeks to curb Chinese influence in the auto industry, especially in electric vehicles and related technologies. The pressure goes beyond tariffs. It extends to cybersecurity rules, software and component restrictions, and possible bans on some companies from the US market, amid security concerns and rising industrial competition. The equation is tough.

Audi invests $4.2 billion in the US

As pressure mounts, some companies are boosting investments inside the United States. The latest move came from Germany's Audi, which announced days ago a $4.2 billion investment to build a plant in the US market, creating 4,500 direct jobs. The step reflects European carmakers' attempt to secure a foothold in the world's largest economy away from any potential penalties linked to China. Audi isn't alone. Other companies are weighing similar moves.

Chinese ownership restrictions threaten Mercedes and Volvo

In July 2026, the US Senate Commerce Committee approved a bill to tighten restrictions on China-linked vehicles, including a proposal to ban companies where Chinese entities hold more than a 15% stake. The proposal raised concerns about Mercedes-Benz, in which Chinese investors own nearly 20% of shares, according to media reports. It also raised questions about Volvo, majority-owned by China's Geely group. Polestar, linked to the same group. The 20% figure is key.

In September, Republican Senator Bernie Moreno said negotiations on the bill are still ongoing, stressing that the aim isn't to ban Mercedes cars in the United States. The bill has not yet become law. But it reflects a trend in Washington toward tighter scrutiny of companies with ownership ties or strategic interests in China. Many European firms are watching closely.

Cybersecurity as a new tool

US pressure isn't limited to ownership structure. It extends to connected-car technologies, under the pretext of protecting national security and personal data. This broadening scope puts companies like BMW and Volkswagen before additional challenges, especially given their reliance on Chinese components and software in some models. European carmakers find themselves between the US market hammer and the Chinese partnerships anvil. The choice is hard.

US pressure takes multiple forms: tariffs, cybersecurity rules, restrictions on software and components, and possible market bans. Together, these tools aim to reduce reliance on China in the automotive supply chain. Major European companies face a difficult equation between preserving their US business and continuing their investments and partnerships in China. No magic solution yet.