The European Union is considering tightening the conditions for subsidies on new energy vehicles, proposing that new energy vehicles eligible for national subsidies or included in public procurement must have a local component localization ratio of about 70%. This move aims to strengthen the local manufacturing industry and address the intense competitive pressure from Chinese companies.
The UK’s Financial Times recently cited a draft legislation from the European Commission, named the Industrial Accelerator Act, which is expected to be officially announced on February 25.
The draft legislation indicates that in the future, new electric vehicles, hybrid vehicles, and fuel cell vehicles sold to consumers through government subsidy programs, or procured or leased by public institutions, must have at least 70% of their components (excluding batteries) manufactured within the EU based on price calculation, and the whole vehicle must be assembled within the EU. Additionally, certain core battery components must also originate within the EU.
However, the threshold of “70%” is currently indicated in brackets, showing that the figure has not been finalized and there is still room for adjustment.
In addition to the automotive industry, the draft legislation will also expand the local component localization requirements to heavy industries such as construction. For example, in future projects applying for government subsidies or participating in public procurement bids, aluminum products must have at least 25% produced within the EU, and plastic materials used for doors and windows must also have at least 30% sourced from the EU.
The report points out that the aim of this legislation is to revive the EU’s manufacturing industry, which is valued at around 2.6 trillion euros, while also incorporating carbon emission factors into public procurement evaluations to balance climate policies and industrial competitiveness.
In recent years, due to factors such as the impact of low-priced Chinese products, high energy prices, and rising costs from stringent climate regulations, several EU countries have seen plant closures and layoffs in the manufacturing industry, exacerbating the risk of industrial hollowing out.
The impending draft has sparked intense lobbying efforts within the industry. Clean technology, battery industry, and component suppliers widely support increasing local ratios, believing it will help strengthen the European supply chain.
However, there are differing opinions among automobile manufacturers. BMW has warned that excessively high thresholds will raise costs; Volkswagen and Stellantis have called for the establishment of a “European manufacturing” subsidy mechanism.
Some carmakers have suggested expanding the scope of the rules to include important partners such as Turkey, the UK, and Japan to avoid rising costs and production pressures resulting from an overly contracted supply chain.