‘Handle with care,’ Mercedes CEO says about Europe’s planned local content rules

‘Handle with care,’ Mercedes CEO says about Europe’s planned local content rules

Automotive News Europe — 2026-02-12

Automotive Industry

The European Union should “handle with care” any measures designed to increase local automotive content to counter threats from China, Mercedes-Benz CEO Ola Kallenius said, to avoid “unintended consequences” such as retaliation.

The EU is likely to propose a local content framework as part of the Industrial Accelerator Act, which is expected to be released on Feb. 25. The bloc’s leaders were meeting informally Feb. 12 to discuss measures to strengthen European competitiveness ahead of the release of the proposal.

Last year, the European Commission pledged to support a “made in Europe” electric vehicle supply chain, starting with a €1.8 billion “battery booster” fund for local gigafactories.

“If you, as an economic actor, act against another economic region with protectionist measures, it would be naive to believe that that other actor just sits back and says ‘whatever’,” Kallenius said Feb. 12 at Mercedes-Benz Group’s annual financial results conference. “It’s more likely they would devise a countermeasure.”

The Commission has made local content a priority for the EV supply chain, while suppliers are calling for regulations for auto production that would sustain the current average of about 75 to 80 percent local content. One fear is that Chinese automakers will build cars from kits or with China-made components in EU factories to avoid tariffs.

“The Industrial Accelerator Act must be robust,” CLEPA, the European suppliers’ lobby group, said Feb. 10. “Specifically, it needs an adequate definition of ‘European-made’ vehicles and components. A European vehicle should consist of at least 75 percent European components.”

Industry is divided over local content rules

The industry is not united on the need for local content rules, and what form they could take, Kallenius said.

“There is no one single position across the industry,” said Kallenius, who is also president of ACEA, the automakers’ lobbying group. For automakers with a global market presence such as Mercedes, BMW or Volkswagen Group, “it’s quite logical that you are in favor of open trade and open markets and against protectionism,” he said.

On the other hand, Kallenius said, a regional manufacturer might favor protectionist measures. “I can relate to that; I understand it,” he said.

Among the diverse viewpoints.

• Departing BMW CEO Oliver Zipse has said that any local content rules that come with quotas are unacceptable.
• The environmental group T&E says that battery local content rules should focus on downstream components such as cells and battery packs rather than raw materials.
• France, which has supported domestic production from local automakers Renault and Stellantis, has been a strong supporter of local content rules, while others including Sweden and the Czech Republic, with factories from global automakers, say they could hamper investment.
• In Germany, Europe’s biggest auto market, the VDA trade group said Feb. 11 that “Location attractiveness is not created by local content requirements, but by reliable, competitive framework conditions.”

Kallenius said he expected “a most intense debate” on local content rules this year. “I’m in favor of a level playing field,” he said, “but whenever you do regulate you should use a very, very fine saw, not a chainsaw, to make sure no unintended consequences will ensue.”