The European Union is set to introduce stringent requirements for electric vehicles as part of the upcoming Industrial Accelerator Act, aimed at safeguarding its domestic industry from affordable competition from China. According to a draft seen by the Financial Times, this proposal affects new electric cars, hybrids, and hydrogen vehicles that benefit from public procurement aids or are owned or leased by public authorities. One of the central stipulations is that these vehicles must be assembled in the EU, with 70% of their components being of EU origin, excluding the battery.

In addition to the proposed assembly and component sourcing criteria, the legislation also imposes requirements on batteries. Key components of these batteries must originate from the EU, which poses a significant challenge given that many European car manufacturers rely heavily on battery suppliers from China and South Korea. Companies like Stellantis and Mercedes-Benz's joint venture ACC have recently scaled back their battery production plans, highlighting the difficulties that may arise from these new regulations and the limited capability of the EU's current supply chains to meet the new standards.

This upcoming regulation could lead to a reshaping of the European automotive landscape as manufacturers adjust their sourcing strategies and production processes to comply with the new rules. The response from the automotive industry has been mixed, with some manufacturers expressing concern over increased production costs and potential supply bottlenecks, while others may see an opportunity to strengthen local supply chains and reduce dependency on foreign suppliers.