Key Takeaways
- The European Automobile Manufacturers Association (Acea) urges the EU to grant the UK, Turkey and Morocco “justified, targeted exemptions” from the new “made in Europe” rules under the Industrial Accelerator Act (IAA).
- Acea argues that the UK remains deeply integrated into the EU automotive value chain, and British‑made vehicles, components and batteries should enjoy the same status as EU‑produced goods.
- Without exemptions, the IAA could effectively shut out UK‑assembled cars from the EU market, jeopardising more than half of UK car exports and threatening plants such as Nissan’s Sunderland facility.
- Major EU carmakers with UK operations—BMW (Mini), Volkswagen (Bentley), Stellantis (Vauxhall), JLR, Ford, Toyota and Nissan—support the call for exemptions to protect their cross‑border investments.
- The IAA is intended to counter Chinese‑subsidised imports that are undermining European industry, but its current scope risks becoming one of the most damaging post‑Brexit consequences for British manufacturers.
- Policy discussions are already underway, with the UK’s Europe affairs minister meeting the EU trade commissioner and UK industry groups urging regulators to reflect the mutual interests of both sides in the final legislation.
Background on the Industrial Accelerator Act (IAA)
The European Commission drafted the IAA as a defensive measure against the surge of cheap, heavily subsidised Chinese automotive components that have eroded European market share. By tying subsidies and public‑procurement eligibility to a “made in Europe” requirement, the EU aims to shield its manufacturers from what it terms a “China shock 2.0.” The rule stipulates that only vehicles, parts and batteries produced within the EU27 qualify for financial support, effectively creating a protective barrier around the bloc’s industrial base. While the intention is to preserve European sovereignty over strategic supply chains, the geographic limitation of the rule unintentionally excludes non‑EU partners that remain tightly integrated with EU production networks.
Acea’s Position on UK Inclusion
Acea, the influential lobby group representing Europe’s major car manufacturers, issued a statement urging Brussels to provide the UK, Turkey and Morocco with “justified, targeted exemptions” from the IAA’s localisation requirements. The association emphasised that the European automotive industry operates a deeply integrated value chain that still includes the UK despite Brexit. Consequently, vehicles, components and batteries assembled in Britain should be treated identically to those made inside the EU27, granting them equal access to subsidies, public contracts and other policy instruments. Acea warned that denying such exemptions would strand European investments in UK factories and weaken the bloc’s competitiveness at a critical juncture.
Industry Reaction from UK Lobby Groups
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders (SMMT), welcomed Acea’s stance, noting that it reflects the “integrated nature of our respective automotive sectors.” He expressed confidence that European regulators would recognise the mutual interest of maintaining seamless cross‑border supply chains. Hawes warned that applying the IAA without exemptions would “effectively shut out UK‑assembled vehicles from most of the European market,” describing the potential outcome as “one of the most spectacular own goals in history.” He pointed out that many British plants are owned by European firms and that the UK and EU remain each other’s largest markets for cars and parts, making mutual access essential for both sides.
Illustrative Examples of UK‑Based EU Production
The commentary highlights several concrete cases where EU carmakers rely on UK facilities: BMW’s Mini plant, Volkswagen’s Bentley factory, and Stellantis’ Vauxhall operations are all located in Britain. Additionally, Jaguar Land Rover (JLR), Ford, Toyota and Nissan maintain substantial manufacturing footprints in the UK. Nissan has reportedly warned privately that it might be forced to close its Sunderland plant if the IAA’s localisation rule stands unchanged, given that more than half of UK car exports currently go to the EU. These examples underscore how deeply entwined EU and UK production networks are, reinforcing the argument for exemptions.
Broader Implications for Turkey and Morocco
Beyond the UK, Acea’s request extends to Turkey and Morocco, where several European manufacturers operate plants that serve the wider European market. The association argued that excluding these existing factories would strand European investments and diminish overall competitiveness. By granting targeted exemptions to these countries, the EU could preserve the efficiency of its global supply chains while still pursuing its strategic goal of limiting reliance on Chinese‑subsidised inputs. The approach would allow the EU to protect its industry without penalising partners that contribute significantly to European value creation.
Strategic Context: Countering China’s Influence
The IAA forms part of the EU’s broader strategy to curb the flood of Chinese components that have been undercutting European producers. European trade groups have warned of an imminent “China shock 2.0,” exemplified by Volkswagen’s proposal to cut as many as 100,000 jobs across Europe. Current data show a trade imbalance running at roughly €1 billion per day in China’s favour, projected to approach €400 billion annually by year‑end. While the EU seeks to defend its industrial base, policymakers must balance protectionism with the realities of integrated global supply chains, especially those linking the EU to the UK, Turkey and Morocco.
German and French Dynamics Shaping the IAA
Although Acea’s stance carries weight due to its strong German membership, the IAA itself is a French‑driven legislative initiative, meaning any amendments will require the backing of French President Emmanuel Macron. Germany, whose automotive sector has significant operations in China, has recently been urged by think‑tanks such as the Centre for European Reform to confront the Chinese threat more directly. Chancellor Friedrich Merz floated a “plaza accord”‑style initiative at the EU summit in June to curb Chinese influence, though at the G7 summit in France he attributed China’s surplus partly to an “artificially low” yuan. These political undercurrents illustrate the complex negotiations ahead as the EU seeks to calibrate its trade defence tools.
Outlook for UK‑EU Automotive Relations
With the UK’s Europe affairs minister, Nick Thomas‑Symonds, already engaged in talks with EU trade commissioner Maroš Šefčovič, the IAA’s localisation rule is slated to be a key agenda item. Both UK and EU industry leaders appear aligned on the need to preserve the existing cross‑border integration that has benefited manufacturers on both sides of the Channel. Should regulators heed Acea’s call for targeted exemptions, the UK could retain access to vital EU subsidies and procurement opportunities, safeguarding jobs and investments. Conversely, a rigid application of the rule risks inflicting significant economic damage on British manufacturers and could accelerate a reconsideration of the UK’s post‑Brexit trade strategy. The coming weeks will likely determine whether the EU’s protective measures evolve into a balanced framework that acknowledges the realities of a deeply interconnected automotive sector.