Three major European carmakers jointly call for 'Made in Europe' rules, localized production may become the new normal

New Demands for "Made in Europe" Under Industrial Competitiveness Alert

In June 2026, the three giants of the European automotive industry—Volkswagen, Stellantis, and Renault—jointly sent a letter to the European Parliament with clear wording and specific objectives, calling on the EU to adopt a more concise set of "Made in Europe" rules, supplemented by stronger incentives to boost local automotive production and supply chain resilience. These three companies together account for about 60% of Europe's vehicle output, and their collective voice is no coincidence; it is a direct reflection of the structural competitiveness crisis facing the European auto industry.

The core policy recommendation in the letter is to require that vehicles sold within the EU have 70% of their value originating from within the 27 member states, covering the entire value chain from engineering R&D to manufacturing. This proposal is not an isolated protectionist stance but is embedded in the broader EU discussion on the "Made in Europe" framework—the EU is reassessing its industrial strategy amidst the transition to electric vehicles.

Three Root Causes of the Competitiveness Crisis

The automakers clearly pointed out in the letter the "unprecedented challenges" currently faced by the European auto industry: significant technological gaps in strategic areas, intense global competitive pressure, and persistently high energy, manufacturing, and regulatory costs. These factors are intertwined and eroding Europe's inherent advantages as an automotive manufacturing base.

Data shows that the European auto market is far from recovering to pre-pandemic levels: annual sales are approximately 3 million units lower than in 2019. Weak demand combined with high costs is forcing companies to reassess the feasibility of local production. The automakers emphasized that "Europe's openness has not changed, but the trend of further shifting industrial output to third countries must be halted."

From an industrial competitiveness perspective, the plight of European automakers is not a recent development. During the electrification transition, Europe's deployment in key areas such as battery technology, software-defined vehicles, and artificial intelligence has clearly lagged behind Chinese and U.S. competitors. At the same time, the EU's own high environmental standards, strict data regulations, and fragmented member-state policies further increase the compliance burden of operating in Europe.

Policy Toolkit: Shift from Incentives to Regulation

The automakers' proposal directly targets two core levers in the EU's industrial policy toolbox: local content requirements and state aid. Although the letter does not detail specific incentive measures, it explicitly mentions "targeted support for battery production" and "greater regulatory flexibility for small cars." This essentially calls for the EU to link EV subsidies to local production, similar to the logic of tax credits for vehicles assembled in North America under the U.S. Inflation Reduction Act.

Notably, the EU has not yet finalized its "Made in Europe" rules for automobiles, but policymakers are examining local content requirements, state support measures, and incentive programs tied to regional production. This trend indicates that the EU's industrial policy is shifting from being driven solely by climate goals to encompassing a dual objective of competitiveness and supply chain security.From a competition policy perspective, the EU has long been cautious about local content requirements to avoid violating WTO rules. However, against the backdrop of geopolitical tensions and risks of supply chain disruptions, the discourse of "strategic autonomy" has opened up space for more interventionist policies. The joint letter from automakers can be seen as an industry force driving this shift.

The Convergence of Supply Chain Resilience and Strategic Autonomy

Currently, imported vehicles account for about 26% of the EU car market. The automakers' logic is: if no action is taken, this share will rise. They pledge to maintain a strong manufacturing presence in Europe, but on the condition of a "more pragmatic regulatory environment."

The timing of this letter is significant: the EU is deliberating the expansion of the CBAM (Carbon Border Adjustment Mechanism), the implementation of ESG disclosure rules, and the enactment of the AI Act. The automotive industry, as the "crown jewel" of manufacturing, sees its need for localized supply chains highly aligned with the EU's goal of strategic autonomy. However, policymakers must weigh the risk that excessively high local content requirements could lead to higher costs, ultimately passed on to consumers, contradicting the goal of "making electric vehicles more affordable."

Looking Ahead: A Crossroads for the European Auto Industry

This joint action marks a shift for the European automotive industry from passive adaptation to actively shaping policy. If the EU adopts a 70% localization value rule, it will reshape the investment landscape for multinational automakers in Europe: battery factories, R&D centers, and localization of key components will become competitive entry thresholds. At the same time, Chinese and U.S. electric vehicle manufacturers may face higher barriers when expanding in Europe.

But in the long term, protectionist measures can only buy a window of time for industrial transformation. Real improvements in the competitiveness of the European auto industry still depend on technological innovation (e.g., solid-state batteries), reductions in energy costs (e.g., green hydrogen applications), and regulatory simplification. The automakers' letter concludes with a key point: "We want to provide clean, affordable, and technologically advanced cars for Europe's middle class." — This is not just a commercial goal but also a response to Europe's political agenda.

(Note: This article is based on analysis of an open letter and news reports and does not constitute investment advice.)