The Industrial Accelerator Act (IAA) proposed by the EU in March aims to help the European automotive industry resist China's unfair trade practices. The bill seeks to promote the upgrade of European car factories and subsidize only cars produced in Europe.
However, this "Made in Europe" plan has caused deep concerns among allied car-producing countries such as Turkey, Morocco, Japan and South Korea, which are all deeply embedded in European supply chains. Earlier this month, Germany and France reached a key compromise after months of stalemate: suppliers from non-EU member states such as the United Kingdom and Norway can obtain "European origin" status, but countries such as Turkey and Morocco are still excluded.
Türkiye is shut out: 70% of automobile exports face barriers
Türkiye, which has had unimpeded access to the EU market since the mid-1990s, remains excluded. Ayhan Zeytinoglu, chairman of the Turkish Economic Development Foundation (IKV), told DW that 73% of Turkey's automobile exports go to the EU. "Made in Europe" barriers will severely damage Turkey's trade and exports to Europe, and will also damage the European automobile industry itself. According to calculations by the Turkish Automobile Exporters Association (OIB), Türkiye's automobile exports to the EU reached US$30.1 billion (26.8 billion euros) last year.
The bill requires that, except for batteries, 70% of the total value of auto parts must be produced in Europe. The original proposal only applied to pure electric, plug-in hybrid and fuel cell models, which accounted for only 27% of new car registrations in the EU last year. Tommaso Pardi, a senior researcher at the French National Center for Scientific Research (CNRS), believes that this threshold is quite loose: after removing the battery from a European electric vehicle, about 83% of its parts come from Europe.
However, according to the revised German-French plan, some hybrid and fuel vehicles that can still be sold after 2035 will also be included in the rules, and the proportion of European parts in these models is much lower. Most of the nearly 800,000 cars Türkiye exported to the EU last year will be affected.
Chinese capital uses Türkiye and Morocco
Another reason for excluding Türkiye is that Chinese car companies are expanding there and trying to enter the EU through this channel. SWM Motors's factory in Turkey was closed less than a year after it started because the vehicles did not meet EU safety standards; BYD's plan to invest US$1 billion in building a factory in Manisa has also been shelved. According to statistics from consulting firm AlixPartners, Morocco has attracted more than 10 billion euros of Chinese investment since the COVID-19 epidemic, mainly in batteries and components.
Morocco is a low-cost production base for French car companies. If it is excluded, France's affordable models are likely to increase in price. Cars imported from Japan by Japanese car companies will not be eligible for EU subsidies; models shipped from Asia by South Korea's Hyundai and Kia are also not eligible, but the battery factories of Korean companies in Poland and Hungary can be counted as European production capacity.
Automakers and parts suppliers have opposing stances
Pardi pointed out that European auto giants are lobbying to weaken the bill so that they can continue to purchase from overseas, especially from China, and maintain high profit margins. Automakers have warned that rising component costs will weaken their competitiveness against Chinese rivals, and that European battery supplies will be unable to meet demand in the short term. Ankara is lobbying Brussels, and car companies are seeking a compromise that would include Turkey in the future, which Pardi believes may be limited to local European companies and exclude Chinese capital.
European auto parts suppliers have called for the strengthening of the bill, warning that without protection, up to 650,000 jobs may be lost by 2035. Benjamin Krieger, secretary-general of the European Automotive Suppliers Association (CLEPA), said: "We must stop the bleeding." He suggested that the EU set up an "opt-in" mechanism with objective criteria such as regulatory convergence, social and environmental standards, respect for the rule of law and the principle of reciprocity as the threshold, supplemented by anti-circumvention measures. Partner countries that meet the criteria, including Türkiye, Morocco, Japan and South Korea, can join.
