EU Auto Bill: Franco-German Deal Sets 70% Parts Rule

Germany and France reached a compromise on the European Union's Industrial Accelerator Act this month, defining new rules for vehicle production subsidies. The agreement establishes that 70% of a vehicle's component value, excluding the battery, must originate in Europe to qualify for state support.

The legislation targets the auto sector's competitiveness against Chinese manufacturers. It currently applies to battery-electric vehicles, plug-in hybrids, and fuel-cell models. These categories accounted for 27% of new car registrations in the EU last year. The German-French framework expands the rule's reach to include self-charging hybrids, petrol, and diesel vehicles sold after 2035.

Turkey and Morocco are excluded from the 'European origin' status under the current draft. Ayhan Zeytinoglu, chairman of the Economic Development Foundation in Turkey, stated that 73% of the country's automotive exports go to the EU. He warned that a 'Made in Europe' barrier would cause great damage to trade. The Turkish auto exporters association OIB reported that Turkey's automotive exports to the EU totaled $30.1 billion last year.

Tommaso Pardi, a senior researcher at the French National Center for Scientific Research, noted that the 70% threshold is generous for electric vehicles. He calculated that an average European-made electric car contains about 83% European parts once the battery is removed. However, the rule becomes more restrictive for internal combustion engines, which contain a lower proportion of European components.

Chinese automakers are expanding in Turkey and Morocco to access the EU market. SWM Motors closed its factory in Eskisehir within a year due to safety standard failures. BYD has paused plans for a $1 billion plant in Manisa. In Morocco, Chinese investments exceeding €10 billion since the pandemic have focused on batteries and auto parts. French automakers rely on Morocco as a low-cost production hub, and excluding it could raise prices for budget models.

European auto-parts suppliers support the strict rules. Benjamin Krieger, Secretary General of the European Association of Automotive Suppliers, said up to 650,000 auto jobs could be lost by 2035 without better protection. He urged the EU to use an opt-in mechanism with objective criteria for partner nations. Ankara is currently lobbying Brussels to join the program at a later stage.