Brussels is preparing to mandate that electric vehicle (EV) manufacturers secure at least 70% of their components from within the European Union to qualify for state support, a move designed to shield the bloc’s automotive industry from increasing competition from China. The proposed legislation, part of a broader effort to safeguard Europe’s manufacturing base, extends to other sectors, including construction, with requirements for locally sourced materials.
According to draft legislation reviewed by the Financial Times, at least 25% of aluminium products and 30% of plastics used in construction – specifically for windows and doors – must be manufactured within the EU to be eligible for government subsidies or public contracts. This initiative reflects a growing concern within the EU over the erosion of its industrial competitiveness due to lower-cost Chinese competition, rising energy prices, and the financial burden of complying with stringent climate regulations.
The forthcoming Industrial Accelerator Act, slated for publication on , aims to bolster European industries by incorporating factors like carbon emissions into public procurement processes. For EVs, hybrids, and fuel cell vehicles, the legislation stipulates that qualifying vehicles must be assembled within the EU and contain at least 70% European-sourced components by value, excluding the battery itself. A significant portion of the battery’s components must also originate within the EU.
The 70% threshold for components remains subject to negotiation, indicated by its bracketed status in the draft legislation. Automotive officials acknowledge that meeting this requirement will be challenging, given the industry’s current reliance on China for battery technology and raw materials. The European Commission declined to comment on the specifics of the draft legislation.
The proposed rules have triggered considerable lobbying from industry stakeholders. Companies in the clean technology and automotive supply sectors have generally expressed support for local content requirements, viewing them as a means to foster domestic industrial resilience. However, car manufacturers are divided on the issue. BMW has cautioned that such rules would introduce unnecessary costs and bureaucratic hurdles. Conversely, Volkswagen and Stellantis recently advocated for a “made in Europe” scheme to incentivize the use of locally sourced components in vehicle production.
Some automakers have proposed broadening the definition of “made in Europe” to include manufacturing hubs outside the EU, such as Turkey and the UK, as well as key trading partners like Japan. This suggests a desire for greater flexibility in meeting the proposed content requirements.
The move comes as Europe’s auto industry faces mounting pressures. Falling demand in China, increased competition both domestically and in third markets, and US tariffs are all straining profitability and employment. In 2024 and the first half of 2025 alone, European auto suppliers announced over 76,000 job cuts, while auto production and sales declined by 1.9% and 2.8% respectively. Germany accounted for more than 45,000 of those job losses.
The EU’s trade balance in the automotive sector is also deteriorating, with exports losing ground and imports of Chinese cars and auto parts continuing to rise. This trend underscores the urgency felt by policymakers to protect the industry and prevent further job losses.
The push for local content requirements represents a shift towards more protectionist industrial policies within the EU, exposing internal divisions over the balance between strategic autonomy and maintaining open markets. While proponents argue that these measures are essential for building industrial resilience and reducing dependence on geopolitical rivals, concerns remain about potential impacts on cost competitiveness and supply chain efficiency.
CLEPA, the European Association of Automotive and Mobility Suppliers, has suggested aligning the EU value threshold for “Made in Europe” status with the USMCA’s regional value content rules for passenger cars and light trucks, which apply specific sub-thresholds to key parts like engines, transmissions, and batteries. This indicates a potential benchmark for the EU’s own local content targets.
The debate over these rules highlights the complex challenges facing the European auto industry as it navigates a rapidly changing global landscape. The success of the Industrial Accelerator Act and its local content provisions will likely depend on the final details of the legislation, the effectiveness of compliance mechanisms, and the ability of European manufacturers to adapt to the new requirements.
