EU's Industrial Acceleration Act Sparks Internal Tensions Over EV Localization Thresholds

The European Commission is pushing forward this year with the implementation of the Industrial Acceleration Act, designating electric vehicles (EVs) as a key area for regulatory control. The draft legislation proposes that EVs eligible for EU public procurement contracts and government purchase subsidies must have more than 70% of their non-battery component value sourced from within the EU. The proposal aims to reshape the regional new energy vehicle supply chain in response to concerns over manufacturing offshoring, declining industrial share in the economy, Asia’s dominance in core new-energy components, and rising market pressure from Chinese EVs in Europe. The draft has triggered intense divisions within the EU. The European Association of Automotive Suppliers (CLEPA) supports the 70% threshold for locally sourced component value, arguing it is practical and warning that relaxing the standard could lead to job losses in manufacturing. In contrast, major automakers such as Volkswagen, Stellantis, and Renault oppose the measure, advocating instead for a “full European value-added calculation system” for complete vehicles. This approach would incorporate a broader range of global production inputs, effectively lowering the requirement for physical local content. Divergences also exist among member states. France and Italy insist that the definition of “Made in the EU” be strictly limited to the 27 EU countries. Germany and the UK, however, favor including neighboring countries like the UK, Turkey, and Morocco in the calculation of local value to safeguard existing overseas production capacities. Excluding these countries could expose their exports to the EU to higher tariff costs and reduced competitiveness. Currently, the Industrial Acceleration Act remains under review, with two core provisions—the methodology for calculating local content and the geographic scope of eligibility—still undecided. Although designed to counter external competition, the policy has already evolved into a complex battle of interests among EU automakers, suppliers, and member states, and risks conflicting with WTO multilateral trade rules, potentially heightening regional trade tensions.