Boosting Made-in-EU EVs & Batteries with the Industrial Accelerator Act (IAA)
May 5, 202632 minutes
Transport & Environment (T&E)
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The IAA proposal is a solid start, but T&E’s position paper argues that many loopholes must be closed to effectively scale a European battery value chain.
T&E supports strong Made-in-EU policies to build Europe’s economic resilience, safeguard jobs and advance its climate and security objectives. The EU should ensure a significant and increasing share of the electric vehicle (EV) technology stack – batteries and their key components, electronics, e-motors, chips and software – is produced in Europe, including by non-European firms that onshore supply chains and enter genuine value-creating partnerships.
The IAA represents a shift in EU industrial policy, embedding Union preference and Foreign Direct Investment (FDI) conditions into law, while setting a framework for low-carbon industrial scaling. T&E welcomes the proposal but urges decision-makers to close loopholes to effectively scale a European battery value chain.
Key recommendations
- Consolidate robust Union origin incentives: To create a solid business case, the IAA should have consistent rules across all vehicle categories. It should mandate that only EVs made with local batteries and components (Made-in-EU, not free trade partners – FTA) can benefit from purchase subsidies and tax incentives for corporate vehicles, including small EVs. Several loopholes risk making the IAA an optional framework. It is key to remove cost and component availability exemptions and not allow EVs with Chinese batteries to qualify as Made-in-EU.
- Focus solely on strategic components: Given the herculean task – industrially and politically – to secure Made-in-EU provisions, laser sharp focus on what is strategic from a supply chain weaponisation and resilience perspective is key. The IAA should prioritise key battery and EV components (the electric tech stack) instead of covering non-strategic parts (e.g. seats, bumpers).
- Boost the battery value chain: At least some local capacity must exist across the entire battery value chain. Notably, precursor cathode active material (pCAM) must be included to both ensure a robust battery component manufacturing and a competitive recycling industry. Incentives for pCAM, as well as anode active material (AAM), critical raw materials (CRMs) and recycled content should be added as third step from 2032.
- Foreign direct investments (FDI) provisions must cover all key investments in the automotive and battery value chain: It is key to preserve FDI provisions and ensure foreign investors use local supply chains. Crucially, FDI conditions must apply to cumulative investments from the past 36 months to cover major investments announced but not yet built.
- Create lead markets for low carbon steel and aluminium: The low carbon steel and aluminium requirements should be extended to all vehicle types (not only EVs). The IAA should mandate both low carbon steel and aluminium to be Made-in-Europe.
To find out more, download the position paper.
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