EU's Proposed "Made in Europe" Rules Spark Auto Industry Backlash, Hitting Plants in Morocco, Turkey, and UK

In March 2024, the European Commission proposed a draft of the Industrial Acceleration Act, which would require electric vehicles (EVs) benefiting from EU subsidies and public support schemes to be fully assembled within the EU, with at least 70% of their total value sourced from EU-based supply chains. The policy aims to bolster European manufacturing competitiveness, reduce reliance on Asian supply chains, and protect domestic employment. However, it has drawn strong opposition from major European automakers—including Volkswagen, Stellantis, and Renault—as well as the European Automobile Manufacturers’ Association (ACEA). Currently, European carmakers operate numerous low-cost production facilities in Morocco and Turkey. Renault runs two plants in Morocco—in Tangier and Casablanca—with combined output expected to exceed 390,000 vehicles in 2025, accounting for roughly one-sixth of its global production. Meanwhile, Stellantis’ Kenitra plant in Morocco is projected to reach an annual capacity of 535,000 vehicles by the same year. Together, these two countries supply popular models such as the Dacia Sandero and Peugeot 208 to the European market. In 2024 alone, Turkey exported approximately 750,000 vehicles to the EU, representing 81% of its total automotive exports—of which Renault’s Bursa plant contributes an annual capacity of 390,000 units. Due to high energy costs, expensive labor, and stringent regulations within the EU, producing small cars locally is often unprofitable. Consequently, these overseas production bases have become essential for maintaining cost competitiveness. Should the proposed 70% local value threshold be strictly enforced, these models would lose eligibility for subsidies—affecting an estimated one million vehicles annually. Although the EU has indicated that countries with preferential trade agreements might be included in the definition of origin, no clear guidelines yet exist regarding whether Morocco and Turkey would qualify. The UK is also impacted. Despite remaining deeply integrated into European automotive supply chains post-Brexit, it is no longer part of the EU regulatory framework. Under current rules of origin, if the UK and EU fail to agree on new localization content requirements by 2027, around 70% of electric and plug-in hybrid vehicles produced in the UK and exported to the EU will face a 10% tariff—adding an estimated £1.4 billion in costs. The new proposal further threatens UK-built vehicles’ access to EU subsidies and participation in public procurement. The Society of Motor Manufacturers and Traders (SMMT) has warned that this move could undermine the competitiveness of the entire European automotive industry. To mitigate potential disruptions, Volkswagen, Stellantis, and Renault jointly submitted an alternative proposal in June 2024: if 70% of a manufacturer’s vehicle sales into the EU meet the 70% EU-origin value requirement, then all its models should be uniformly recognized as “Made in Europe.” ACEA subsequently called for the UK to be included within the definition of “Europe” and advocated applying a “grandfather clause” to existing production capacities in Turkey and Morocco, ensuring prior investments are not invalidated by the new rules. The association also recommended broadening the scope of vehicle value calculations to include R&D and engineering expenditures, introducing incentive mechanisms to offset compliance costs, and simplifying administrative procedures. The Industrial Acceleration Act has not yet been finalized, and discussions continue over whether countries like Morocco and Turkey should be included in the definition of “European-made.” Industry observers anticipate that negotiations will extend into the second half of 2027, with the final outcome set to directly affect the policy treatment of millions of vehicles and reshape the global supply chain architecture of Europe’s automotive sector for the next decade.