In a strategic response to rising competition from Chinese automotive giants, the European Union is introducing new regulations aimed at safeguarding its local car manufacturers and components suppliers. This move, however, is seen as somewhat belated and focuses particularly on the electric, plug-in hybrid, and fuel cell vehicle sectors, as well as ensuring a secure supply of components. According to a draft law reviewed by the Financial Times, vehicles covered by government purchase incentives must be assembled within the EU and contain at least 70% locally sourced components.

Moreover, the legislation stipulates that various key elements of a vehicle's battery must also originate from the EU. This requirement has raised concerns in the industry, particularly due to the EU's heavy reliance on China for battery technology and its constituent materials, which could pose challenges in meeting the new standards. The impending law is set to be enacted on February 26, marking a significant shift in the EU's approach to its automotive industry in light of growing global competition.

As Europe strives to bolster its automotive self-sufficiency and reduce dependence on Chinese imports, this legislative effort reflects broader trends in global trade where regional blocs are attempting to shield their industries from external pressures. The implications of this regulation, which includes local assembly and sourcing requirements, could reshape the competitive landscape of the automotive market in Europe and influence future investments in the industry, promoting an ecosystem that prioritizes local production over global supply chains.