EU’s Industrial Accelerator Act: Boosting ‘Made in Europe’ Tech and Competition

The European Commission has unveiled the Industrial Accelerator Act (IAA), a landmark regulation designed to strengthen European industrial autonomy and increase demand for low-carbon, European-made technologies. The initiative aims to raise the manufacturing industry’s share of European GDP from 14.3% in 2024 to 20% by 2035 . The IAA introduces specific requirements for products to qualify as “Made in EU,” impacting sectors like electric vehicles, batteries, and renewable energy components.

Defining “Made in EU”: Requirements for Vehicles

At the heart of the new regulation lies a precise definition of what constitutes a “Made in EU” vehicle, particularly concerning access to subsidies, bonuses, and public tenders. To qualify, vehicles must meet stringent criteria related to design and production:

• Final Assembly: The vehicle must be fully assembled within the European Union.
• 70% Component Threshold: At least 70% of the value of components (excluding the battery) must originate from within the EU .
• 50% Engine and Technology: A minimum of 50% of electric motor components and advanced technological systems – including LiDAR, radar, sensors, electronic control units, and infotainment systems – must be produced in Europe.
• Battery Components: Batteries must contain at least three key components of EU origin, including the separator, and at least five main cathode- and anode-specific components, encompassing the cathode active material and battery management system (BMS).

Incentives and Flexibility for Manufacturers

The IAA introduces “supercredits” to incentivize the production of small electric vehicles. Cars meeting the “Made in EU” requirements will have a coefficient of 1.3 instead of 1 when calculating fleet emissions . To qualify for these supercredits, manufacturers must ensure assembly within the EU and meet either the 70% component threshold or specific battery requirements.

A flexibility clause, known as the “85% rule,” allows manufacturers to request compliance for 12 months if they can demonstrate that at least 85% of the cars they registered in the previous year were assembled in the EU.

Reciprocity and Investment Restrictions

The European Commission emphasizes the principle of reciprocity, stating that goods originating from foreign partners with whom the EU has established free trade agreements or customs unions will also be considered of “EU origin.”

The IAA also introduces restrictions on new foreign investments exceeding €100 million, requiring a minimum of 50% European employment . This measure is largely aimed at addressing concerns surrounding competition, particularly from China, in strategic green industries like batteries, electric vehicles, solar photovoltaic technology, and critical raw material processing.

Addressing Protectionism Concerns

The introduction of the IAA has sparked debate, with some critics raising concerns about potential protectionism. However, the Commission maintains that the proposal aligns with the recommendations of the Draghi report and aims to level the playing field while fostering a competitive European industrial base.