How the EU Industrial Accelerator Act Could Change EV Prices and Competition

The EU’s proposed Industrial Accelerator Act (IAA) is designed to turn public spending and support schemes into demand for European industrial capacity. For electric vehicles, that could help anchor assembly, battery production and component supply in Europe—but it also creates a clear affordability risk in the early years.

The central trade-off is straightforward: local-content conditions may give European producers a more predictable market, yet local batteries and low-carbon materials currently cost more. For buyers, the result could be pricier qualifying EVs or a need for larger subsidies to keep them affordable.

What the proposed EV rules would do

The IAA is a proposal, not a blanket prohibition on imported cars. Its vehicle provisions apply through covered public-procurement procedures and public-support schemes, rather than preventing a non-qualifying vehicle from being sold privately. 12 46

For qualifying EVs, the proposal would require:

• final assembly in the EU;
• at least 70% of the ex-works value of non-battery vehicle components to originate in the EU; and
• traction batteries to include a specified number of EU-origin components, including battery cells. The required component count would rise after three years. 12 15

That design changes the competitive incentive. Automakers seeking public contracts or access to relevant support would have reason to move more of their supply chain into Europe. The pressure would apply to any manufacturer, not just firms headquartered outside the EU.

Why qualifying EVs could cost more at first

Bruegel’s estimate, reported by Euronews, puts the cell-cost gap at €35 per kilowatt-hour: €85/kWh for EU-made cells versus €50/kWh otherwise. On a 60 kWh battery pack, that is about €2,100. Adding a reported €200 cost for low-carbon steel and subtracting €61 from simplified approval rules yields an indicative net production-cost increase of roughly €2,239. 24

That calculation is not a forecast of an identical showroom-price rise. Carmakers could absorb some cost in margins, redesign vehicles, adjust battery sizes or receive more support. But lower-priced EVs generally leave less room to absorb higher input costs. Unless subsidies close the gap, the policy is therefore most likely to create pressure in the entry-level segment.

The immediate policy question is not only whether Europe should pay a premium for local production, but who pays it: manufacturers, taxpayers or consumers.

The €500-by-2030 case is possible, not guaranteed

Transport & Environment (T&E) offers a more optimistic scenario. Its analysis estimates that the average extra cost of a European battery could fall to around €500 per EV by 2030, with a range of €300 to €750 depending on the carmaker. 36

This is the case for using demand guarantees to accelerate learning, utilisation and supply-chain investment. Reuters reported T&E’s expectation that scaling European production could reduce the battery cost gap with China from about 90% today to roughly 30% by 2030. 33

But a lower future premium is conditional, not automatic. Battery factories need investment, operating scale and reliable demand. Local-content protection without competitive plants could preserve a cost disadvantage rather than solve it.

Competition would shift toward production location

The IAA would make competition more dependent on where cars and components are made. Chinese-built vehicles that do not meet the conditions could remain available to private buyers, but would be disadvantaged in covered procurement and support channels. Meanwhile, Chinese manufacturers could respond by establishing qualifying European assembly and supply chains.

That distinction matters because the policy is not simply a contest between European and Chinese badges. Bruegel reports that Chinese-built EVs passed 20% of EU EV sales in 2026. 21 The IEA also notes that the EU remained the world’s second-largest electric-car producer in 2025, with domestic manufacturers producing most regional output. 27

Localisation by foreign-owned manufacturers could bring investment and jobs to Europe while retaining competition on vehicle price, battery technology and software. Conversely, if the rules primarily reduce the number of viable low-cost models without delivering substantial new capacity, consumers would get less choice at a higher price.

Why Brussels is willing to take that risk

The policy arrives amid sustained pressure on Europe’s auto industry. EU passenger-car production has fallen by around 2.6 million units since 2019, a decline of 19%, according to Bruegel. The wider automotive value chain employed about 14 million people in 2025. 20

The industrial rationale is therefore substantial: public demand that is predictable and conditional on local capacity can improve the investment case for European battery and component plants. The Commission has framed the IAA as a regulation to accelerate industrial capacity and decarbonisation in strategic sectors. 46

Still, demand protection is not the same as competitiveness. A successful policy needs companies to lower costs, innovate and export—not merely to qualify for a protected share of publicly supported demand.

A better design: gradual rules and affordability safeguards

The strongest version of the policy would use local-content conditions as a temporary runway, not a permanent shelter. Practical safeguards include:

• Phase requirements in predictably. Tightening thresholds over time gives suppliers a clearer investment signal while reducing short-term disruption.
• Protect affordable EVs. Targeted support for small and lower-priced models can prevent local-content rules from becoming a premium paid disproportionately by price-sensitive households.
• Link support to real capacity and cost reduction. Public support should reward factory build-out, utilisation, innovation and lower battery costs—not only formal compliance.
• Build in reviews and expiry points. Regular assessment can test whether prices, production and supply resilience are improving enough to justify continued restrictions.

Bruegel’s quota alternative: a bridge with legal risk

Bruegel has also proposed a time-limited EU–China arrangement covering exports of EVs and hybrids, backed by a snapback mechanism, as an alternative to simply shutting out Chinese competition. 24 The economic appeal is that a temporary cap could slow an import surge while leaving some competitive pressure in the market and buying time for European producers to improve.

The legal and practical risks are significant. Bruegel has warned that local-content requirements face trade-law constraints and that the EU has procurement-access commitments toward partners in the WTO Government Procurement Agreement. 50 A country-specific export-restraint arrangement would likewise need careful legal scrutiny; it should not be assumed to be a simple or durable substitute for competitiveness.

Bottom line

The IAA could make publicly supported and publicly purchased EVs more European—and, initially, more expensive to produce. Bruegel’s near-term arithmetic points to a potential €2,239 cost increase for a typical qualifying 60 kWh EV, while T&E’s €500-by-2030 estimate shows what could happen if European battery manufacturing reaches scale. 24 36

The policy’s value will be decided by execution. If it helps create efficient European battery and component capacity while preserving affordable EV choices, it can strengthen the industry. If it mainly raises input costs and reduces competitive pressure, the result may be a costly “Made in Europe” premium without a durable industrial payoff.