IAA Will Ensure Most EVs Sold in Europe Will Have Batteries Made in the EU, but Loopholes Threaten Its Impact

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T&E’s reaction to the proposed Industrial Accelerator Act.

• Local content rules are a positive step for Europe’s battery industry as corporate cars will be required to have local batteries.
• But extending EV purchase subsidies to all FTA countries and requiring non-strategic components to be local, undermines its effectiveness.

From 2027, almost two-thirds of electric cars sold in the EU will be required to have batteries produced in Europe, according to local content rules announced today. T&E welcomed the proposed EU Industrial Accelerator Act (IAA) which defines made-in-EU criteria for EVs to be eligible for company car tax incentives. T&E said the draft law, if tightened by lawmakers, can support investment in a domestic battery industry and help make Europe’s supply chains more resilient against being weaponised by rivals.

The IAA proposal defines made-in-EU batteries as having at least three components, including the cells, produced in Europe. In 2030 this rises to at least five components, including cells, cathode active materials (CAM) and battery management systems (BMS). EVs will also be required to have green steel, while 70% of their components, excluding batteries, will have to be produced in the EU.

Julia Poliscanova, senior director for vehicles and emobility supply chains at T&E, said: “This is a positive step for Europe’s battery industry as company cars will soon have to run on locally made batteries. We finally have a tool to avoid foreign countries turning off clean tech supplies to Europe. But parliamentarians and capitals must tighten the many loopholes to truly give investors certainty that they can bank on Europe’s battery industry.”

However, T&E criticised the eligibility for purchase subsidies of EVs produced in free trade agreement (FTA) countries. It also said the mission creep from the original aim of the law means that it now covers non-strategic EV components such as seats and seat belts. The exclusion from the rules of cathode precursors (pCAM), which account for over half of the battery cell value, is also worrying as it will undermine building a local recycling sector.

The IAA will now be debated by the EU Parliament and EU governments before becoming law.

Article from T&E.