Siege of China: EU to require electric cars to have 70% European parts

In an offensive to protect its industrial base from growing Chinese competition, the European Union is preparing strict legislation that links the granting of automotive subsidies to local production. Called the Industrial Accelerator Law, the new proposal provides that electric cars benefiting from state incentives or acquired via public procurement must have at least 70% of their components manufactured within the European bloc.

The political maneuver tries to shield a market valued at €2.6 trillion, which has been suffering severe blows recently with the closure of traditional factories. According to the text under discussion, in addition to reaching the quota of 70% of regional content – a value calculation that, initially, excludes the battery pack – the vehicles will need to have their final assembly carried out in EU member countries to qualify for financial support.

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Nationalization of batteries and the split in the sector

Batteries, which account for the largest share of the cost of an electric vehicle, have been given a separate guideline. The legislation stipulates that the main chemical and structural elements of energy storage systems must also be of attested European origin. The strictness of the rule highlights Brussels’ urgency to reduce extreme technological dependence on external suppliers, forcing the construction of an independent production chain on the continent.

The protectionist turn, however, has opened a deep rift in the automotive industry. On the one hand, conglomerates such as Volkswagen and Stellantis support the new barriers as a necessary way to ensure internal competitiveness. On the other hand, manufacturers with a strong global presence, such as BMW, warn of the dangers of tariff retaliation and possible trade isolation.

The bloc’s immediate challenge will be to structure this network of local suppliers efficiently and in record time. Industry experts warn that, given the current dependence on Asian inputs, the forced transition could generate logistical bottlenecks and drastically increase production costs, passing on the heavy bill for the ecological transition directly to the final consumer’s pocket.