Europe plans new rules on EV incentives to favor local cars

19 February 2026

The European car industry is facing a massive challenge - European brands used to rule the roads, but the shift to electric cars has changed everything. Now, low-cost competition from China is making life very difficult for local factories. To fight back, officials in Brussels are preparing a new plan. They want to make sure that the money spent on green energy actually stays within Europe.

The European Commission is drafting a law (the Industrial Accelerator Act) to protect the region's huge manufacturing base, which is worth about £2.22 trillion with millions of jobs depending on it. Many factories in Europe have had to close their doors due to high energy prices and the high cost of meeting strict climate goals, making it hard for them to compete with cheaper imports.

One of the biggest changes in this plan involves subsidies. Right now, many governments give people money to help them buy electric cars. These are often called "EV incentives." Under the new rules, a vehicle must be assembled inside the European Union to qualify for this help. But assembly is not enough. The draft law says that 70% of the parts in the car must also be made in Europe. This 70 percent rule is measured by the price of the parts, not just the number of pieces.

There is a small catch, though - the 70% requirement does not include the battery. The law does not let batteries off the hook entirely. It states that several important parts of the battery must also come from within the EU. This is a very difficult goal because China currently controls most of the world's battery technology and the raw materials needed to make them. European carmakers have relied on foreign batteries for years, and changing that will not happen overnight.

The EU also wants to change how it buys things for its own use. When cities buy new mail trucks or police cars, they will have to look at more than just the price. They will have to consider how much carbon was created when the vehicle was built. This makes it much harder for companies that ship cars from halfway across the world to win government contracts.

Interestingly, the construction sector is also included in the draft legislation. The plan says that 25% of aluminum products must be made in the EU. For plastics used in windows and doors, that number jumps to 30%. Brussels seems determined to make "Made in Europe" a requirement for any company that wants a piece of the public's money.

As you might guess, not everyone in the industry is happy about this. The car companies are split right down the middle. BMW has already expressed concerns. They worry that these rules will create mountains of extra paperwork and make cars more expensive for everyone. On the other side, companies like VW and Stellantis are asking for even more support. They want a formal "Made in Europe" label that rewards them for using local parts and labor.

There is also a big debate about who counts as a "neighbor." Some car companies want the EU to include manufacturing hubs like the United Kingdom and Turkey in their definition of local. They even want to include big partners like Japan. If the rules are too strict, it could hurt brands that have spent billions of dollars building factories just outside the EU borders.

The 70% number is still being discussed and could change before the final version is released. We expect to see the official Industrial Accelerator Act in March. This law is a clear sign that Europe is tired of watching its industries struggle while foreign competitors grow.

Whether this plan will actually save the European car industry is an entirely different story. Building a car is a global business, and untangling those supply chains is a giant task. If the plan works, it could lead to more jobs and a stronger economy. If it fails, electric cars will become more expensive for the average driver - we will be watching closely when the final rules are published next month.

Via