EU sets 70% EV-parts rule

Europe’s clean-tech push is moving from subsidy to instruction. Under the Industrial Accelerator Act (IAA), proposed by the European Commission on 4 March 2026, green technology bought with public money or supported by state subsidies will have to be substantially made in Europe (European Commission). That covers electric vehicles, solar panels and batteries. It will also make them more expensive, though the Commission has not published a full estimate of the bill consumers will face.

What the rules require

For electric vehicles, at least 70% of component costs, excluding the battery, must come from European producers. Batteries face their own test: at least three main components, including cells, must be made in Europe (Bird & Bird). Most of the law would apply from around March 2027, with the full battery-origin rules phased in by 2030 (European Parliament Think Tank, Arthur Cox).

A parallel move from Trade Commissioner Maroš Šefčovič would tighten the net further. His proposed "three suppliers rule" would limit any manufacturer to sourcing 30–40% of its components from a single country. Industry Commissioner Stéphane Séjourné, the main architect of the IAA, backed that pressure in May. "Do not get 100% of your supply from one country," he said, warning that if companies do not diversify voluntarily, "we will move to the next step" (Euronews).

Where the premium comes from

The basic problem is price. Chinese batteries, solar panels and automotive chips are cheaper because Chinese producers operate at greater scale, benefit from heavy state support and face lower labour costs. European manufacturers cannot match that at their current size. If public money is tied to local sourcing, every discounted Chinese component replaced by a European one raises the cost base.

The Commission’s own proposal acknowledges the gap. It includes a cost-waiver clause, allowing local-content requirements to be suspended where the European alternative is substantially more expensive than the import, with thresholds varying by product category (European Commission Impact Assessment). That escape route is a quiet admission that the premium is not theoretical.

There is also the machinery of compliance. Manufacturers will need traceability systems, origin certification and separate accounting for parts moving across borders. In a sector built on long, layered supply chains, proving where value is created can be almost as costly as changing the supplier.

Who gains, who loses

The immediate winners are European battery and solar manufacturers that now struggle to compete with cheaper Chinese imports. Countries building battery gigafactories, the large-scale plants needed for mass battery production, in France, Spain and eastern Germany are well placed to capture work redirected by the rules. Industrial unions support the approach because it keeps more manufacturing jobs on the continent.

The first losers are buyers. Higher component costs will feed through into electric vehicle and solar panel prices, with the sharpest effect on entry-level EVs and household solar. Those are exactly the parts of the market where prices matter most if Europe wants adoption to speed up.

Cheaper Chinese green technology would lower the cost of decarbonisation and help cut energy bills. Restricting it protects European industry, but it also makes the energy transition dearer for the people expected to take part in it. The Commission’s bet is that a more expensive transition now buys greater industrial independence later.

The fight over thresholds

The law still has to pass the European Parliament and the Council of the EU, where national governments negotiate and vote. Several governments have already raised concerns about higher costs and possible trade retaliation from both the US and China.

The real fight will be over the origin thresholds and the cost-waiver clause. If the thresholds are set too high, manufacturers may be asked to comply before the European supply base exists. If they are set too low, Chinese components will continue to move through the system with little change. Parliament and national governments now have to decide where the line sits. Their answer will determine whether the IAA rebuilds European industry or simply makes the green transition more expensive.