Tariffs, connected-vehicle restrictions, and state franchise laws still protect the American market, but direct-sales loopholes and Chinese battery technology may be opening a back door through the nation’s industrial base.
The Craig Bushon Show — Bold Talk for a Brave America
By Craig Bushon
Tomorrow, the Senate Commerce Committee votes on the Connected Vehicle Security Act of 2026, a bipartisan bill that would write into permanent law the ban keeping Chinese vehicles, software, and hardware off American roads. Most Americans have never heard of it. They should, because it is one of the three layers of the firewall standing between the American automobile market and what has already happened to Europe, and this column has spent the past several weeks documenting exactly what that looks like. Today I want to walk you through the defenses we have, the breach attempt already underway, and the technology that has already come in through the back door while Congress guards the front.
Start with why the walls exist at all, because the reasoning is not protectionism dressed up in a flag. It is two distinct threats that both administrations, Republican and Democrat, have recognized. The first is surveillance. A modern connected vehicle is a smartphone on wheels: cameras reading the road and everything beside it, microphones inside the cabin, GPS logging every trip, all of it transmitting to servers somewhere. Federal regulators concluded that vehicles built on Chinese software and hardware present exactly that data-collection risk at national scale, which is why the Commerce Department finalized a rule in January 2025 barring Chinese connected-vehicle software beginning with the 2027 model year and hardware by 2030. The first hard deadline already arrived: since March of this year, automakers selling in America must attest that the core systems connecting their cars to the cloud contain no software written in China. The industry’s own trade association calls it one of the most consequential auto regulations in decades.
The second threat is economic, and it is the one my show’s audience knows in its bones. Chinese vehicles are not cheap because Chinese companies are better; they are cheap because the Chinese state absorbs the cost. The Senate bill’s own findings describe autos heavily subsidized by the Communist Party flooding markets in Mexico and Europe and crushing local industries with artificially low prices, and the House sponsor charges that China deliberately overproduces and dumps vehicles to put American companies out of business, with forced labor in the supply chain undercutting American wages. The math is seductive by design: by one recent comparison, the price of the average American car would buy five new Chinese electric vehicles. Working families are the intended target of that math. So is the ten-million-job American automotive ecosystem behind them.
Here is what should give every reader pause about the politics of this: the wall is bipartisan in a way nothing else in Washington is. President Trump signed the 2019 executive order declaring a national emergency over the technology supply chain, creating the legal authority. The Biden administration used that authority to finalize the connected-vehicle rule. And the 2026 bill making it permanent is sponsored by an Ohio Republican and a Michigan Democrat, endorsed by both the United Auto Workers and General Motors, with more than seventy Democrats having urged President Trump to ban Chinese-made vehicles outright ahead of his meeting with Xi Jinping. Labor and management, left and right, two administrations that agree on nothing. When that coalition forms, it is because the threat assessment is not partisan. Meanwhile the Wall Street Journal reports that China’s high-tech cars are already parked in El Paso, staged just across a border in Mexico that Beijing is using as a beachhead market.
Tariffs and the security rule are the first two walls. The third is older, quieter, and closer to home: the state franchise laws that require manufacturers to sell through independent, locally owned dealerships. Understand what those laws actually protect, because it is not what critics claim. They do not keep foreign brands out; Toyota, Hyundai, and Kia all entered America through the franchise system and thrived. What the laws guarantee is that the retail layer of the American car business remains in American hands: thousands of family-owned businesses, in every congressional district, employing local people, sponsoring local ball teams, and answering to state law rather than to a factory an ocean away. Europe has no equivalent, and that difference matters enormously, because it means any manufacturer entering Europe can sell direct from company stores at whatever price a foreign treasury is willing to subsidize. In America, an entrant has to come through Main Street, and Main Street is organized, invested, and paying attention.
Which is why the current assault on the franchise system deserves far more scrutiny than it is getting. Tesla breached the wall first, winning state-by-state carve-outs as a company that had never signed a franchise agreement. But the breach that matters is happening now, and it is an inside job. Volkswagen has revived the Scout nameplate, an American heritage brand, as a subsidiary structured to sell directly to consumers and bypass VW’s own franchised dealer network entirely. Dealers are fighting back on every front: a nationwide class action in federal court alleges VW formed the Scout companies as shell corporations to escape its dealer obligations, and dealer associations in California, Florida, Colorado, and, as of two weeks ago, Washington have filed their own challenges, with a federal judge already ruling the California case will proceed. Scout insists it is independent, though its own chief executive has said plainly that Scout is one hundred percent part of the Volkswagen Group. I will let the courts sort the contracts. My concern is the precedent, because if the shell-company structure survives, the ruling will not say Volkswagen may sell direct. It will say any manufacturer can bypass America’s franchise system by incorporating a fresh nameplate with no franchise history. Now recall what my last column documented in China: a Chinese platform, Chinese batteries, Chinese software, wrapped in a licensed heritage badge called Freelander. Marry that model to the Scout precedent that seems to be gaining steam and you have the Trojan horse fully assembled: a Chinese-engineered vehicle wearing some familiar name, sold direct, with no American dealer, no local ownership, and no Main Street constituency standing between the factory and your driveway.
And while Congress reinforces the front door, look at the loading dock. Ford has dissolved its battery joint venture with Korea’s SK On, and its new Ford Energy subsidiary is converting the Kentucky plant, built with the help of a $3.8 billion federal loan, to produce grid-scale storage batteries on technology licensed from CATL, the Chinese battery giant the Pentagon added to its list of Chinese military companies last year. Korean equipment is physically being removed and replaced with Chinese-process production lines, and this is the second such plant, following the Michigan facility that began producing on CATL technology in June. I am not accusing Ford of disloyalty; Ford is responding rationally to the environment it operates in, which is precisely the pattern this series has traced from Coventry to Changshu. But the picture deserves to be stated plainly: America is banning Chinese vehicle technology at the border while licensing Chinese battery technology into the industrial base with taxpayer-backed financing, and congressional scrutiny of that contradiction is only beginning.
If you want to know what America looks like without its three walls, look across the Atlantic, because Europe is the control group in this experiment, and Europe is losing. It is not that European leaders cannot see the threat; it is that they are compromised, in the plainest sense of the word. German automakers still earn a massive share of their profits inside China, so when Brussels imposed even modest anti-subsidy duties on Chinese EVs, Germany voted against its own union’s measure under the shadow of Beijing’s retaliation. Europe’s climate laws, including a legislated ban on combustion engines, created mandatory demand for affordable electric vehicles that its own industry cannot yet build at the required price, making China’s subsidized product the legal solution to Europe’s own statute. The European Union has no national-security instrument like America’s connected-vehicle rule, and China exploits the seams between member states, planting factories in Hungary, Spain, and Turkey while each capital competes for the jobs. Post-Brexit Britain applies no additional tariff at all. The results are arriving on schedule: Volkswagen, blocked by its own board from closing four German plants, now plans to cut one hundred thousand jobs and up to half its model lineup. BMW has issued three China-related profit warnings in under three years, with sales there falling toward a third consecutive annual decline against rivals selling premium models at lower prices. Stellantis watched its Jeep joint venture collapse into bankruptcy. And Jaguar Land Rover, this series’ case study, survives on a British taxpayer guarantee while its Chinese factory changes badges. Every one of those companies spent decades transferring technology into China as the price of market access. The student has finished the coursework.
America is not immune to that ending; it is merely defended against it, for now, by a firewall built of two federal measures and fifty state statutes that most voters have never thought about. Tomorrow’s committee vote will tell us whether Washington intends to make the federal layers permanent. The Scout litigation will tell us whether the state layer holds. And the Kentucky back door will tell us whether we mean any of it. Keep watching all three, because this is not a story about cars. It is a story about whether the world’s most important consumer market gets to decide who operates inside it.
The truth is not hate speech. Read between the lines, and get to the bottom line.
Craig Bushon is the host of The Craig Bushon Show and brings more than two decades of automotive retail experience and media coverage to his analysis of the industry.
