EU will propose 70% local content rules for EVs to qualify for incentives, report says

EU will propose 70% local content rules for EVs to qualify for incentives, report says

Automotive News Europe — 2026-02-17

Automotive Industry

The European Commission will propose that electric vehicles will need to have at least 70 percent EU content to be eligible for state subsidies, the Financial Times reported, in an effort to protect the bloc’s manufacturing base from low-cost competition from China.

The proposal would be part of the Commission’s Industrial Accelerator Act, which is to be released Feb. 25, according to a report Feb. 17 in the FT, which saw a draft version.

The Commission in 2025 said it would develop rules for local content for the EV value chain, as part of a comprehensive auto sector rescue package that included looser emission rules.

But the industry is divided on whether local content rules would amount to protectionism that would invite retaliation from China. Suppliers and some advocacy groups have supported them, while automakers including BMW and Mercedes-Benz say they risk retaliation from China and could stifle innovation.

According to the FT report, new EVs, hybrids and hydrogen fuel-cell cars that benefit from government purchase incentives, or those that are owned or leased by public bodies, must be assembled in the EU and at least 70 percent of their components, with the exception of the battery, must originate in the bloc, as measured by price.

The proposal also says that several main components of the battery need to be of EU origin. Most EU automakers rely on Chinese and South Korean suppliers for their battery packs, although several have set up factories in the EU. A joint battery venture of Stellantis and Mercedes, ACC, recently scaled back its ambitions to build three gigafactories in the EU.

The European Commission in 2025 pledged to support a “made in Europe” EV supply chain, starting with a €1.8 billion “battery booster” fund for local gigafactories.

Suppliers including Valeo have urged that any local content rules cover all components.

The suppliers’ lobby group, CLEPA, said in September that “without urgent EU action,” Europe could lose up to 350,000 jobs, through “the combined effect of powertrain transition and value transfer outside the EU.”

Suppliers say that 75 to 80 percent of the content of EU-assembled cars originates in the bloc, and they say local content rules should at least preserve the status quo.

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 said in a news release Feb. 10 as regulators prepared to meet in Brussels to discuss the legislation. “Specifically, it needs an adequate definition of ‘European-made’ vehicles and components. A European vehicle should consist of at least 75 percent European components.”

Separately, Europe-based battery suppliers sent a letter to Commission President Ursula von der Leyen in November calling for the local content rules, calling them critical to reduce reliance on delete countries such as China and maintain jobs in Europe.

“The state of the European battery value chain requires urgent action,” the letter said.

Mercedes, BMW oppose local content, while Renault is in favor

Automakers are divided on local content rules. Those with a heavy presence in China, including BMW and Mercedes, have opposed them. Renault has supported them, though CEO Francois Provost in December suggested a companywide threshold of 60 percent.

Mercedes-Benz Group CEO Ola Kallenius, who is also president of the automaker lobby group ACEA, 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.”