The European Commission is preparing legislation that would tie state subsidies for electric vehicles to local production, potentially requiring cars to be assembled within the European Union and source at least 70% of their components from the bloc. The proposal, first reported by Financial Times, is part of a broader effort to strengthen domestic industry amid global competition.
Under the draft plan, only battery-electric, hybrid, and fuel cell vehicles built in the EU would be eligible for public purchase incentives, procurement contracts, or leasing schemes funded by governments. In addition, at least 70% of non-battery components would need to originate from EU suppliers, measured by value, while certain battery materials and parts would also have to be produced within the bloc.
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Officials are still debating the exact threshold, which remains in square brackets in the draft text, indicating it could change before adoption. The measures are expected to be included in the forthcoming Industrial Accelerator Act, scheduled for publication on Feb. 25, and could extend beyond the automotive sector to construction and heavy industry.
The initiative reflects mounting pressure on European manufacturers from lower-cost imports, particularly from China, as well as high energy prices and the expense of complying with EU climate regulations. Policymakers also want public procurement processes to factor in carbon emissions, potentially favoring locally produced goods with lower transport-related impacts.
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Major automakers including Volkswagen and Stellantis have publicly supported a “Buy European” approach. Volkswagen Chief Executive Oliver Blume and Stellantis executive Antonio Filosa recently urged policymakers to prioritize domestic manufacturing, writing that “Every battery-electric vehicle ‘Made in Europe’ should receive a CO₂ bonus.”
Not all manufacturers back the proposal. BMW has warned that strict localization rules could increase costs and administrative burdens. Some companies are advocating a broader definition of “European” production that would include facilities in countries such as the United Kingdom and Turkey, as well as strategic partners like Japan.
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The draft policy forms part of a wider EU strategy to reduce reliance on external suppliers for critical technologies, building on earlier measures such as the Critical Raw Materials Act aimed at securing supply chains for energy transition industries.