"Made in Europe": What the Industrial Accelerator Act Means for Automotive Manufacturers

European manufacturing accounts for 14.3% of EU GDP. Brussels wants it at 20% by 2035. The Industrial Accelerator Act is the tool designed to close that gap, and for automotive manufacturers, every detail of it counts.

What is the Industrial Accelerator Act?

The European Commission's proposed Industrial Accelerator Act (IAA), released on March 4th, 2026, represents a central pillar of the EU's evolving industrial policy framework. The initiative sets a strategic objective of increasing the share of manufacturing in EU GDP from 14.3% in 2024 to 20% by 2035, with a particular focus on expanding Europe's industrial capacity across three strategic sectors: energy-intensive industries, low-carbon technologies, and the automotive supply chain. The proposal is intended to strengthen Europe's industrial competitiveness, reinforce economic resilience, and reduce dependencies on external suppliers in strategically important value chains.

"The Good”: Supply Chain Flexibility and FTA Recognition

EU-Origin Equivalence and FTA Partners

Several provisions contained in the proposal have direct implications for global automotive manufacturers operating within Europe's highly integrated industrial ecosystem. One positive development is the extension of EU-origin equivalence for public procurement and public support to partners covered by Free Trade Agreements (FTA) and the Government Procurement Agreement (GPA). Under Articles 8, 11, and 12, this equivalence applies to approximately 40 partner countries, including the United Kingdom, Japan, South Korea, and Turkey. In principle, this broader interpretation of "Made in Europe" recognizes the reality of deeply interconnected global manufacturing networks.

However, a key legal uncertainty remains regarding the distinction between "content" and "assembled in the Union." A strict legal interpretation could limit the equivalence provision to the origin of components and materials, rather than the physical location of vehicle assembly. Under such a reading, vehicles assembled outside the EU (such as those produced in the UK) could still be excluded from procurement frameworks and public support mechanisms. Further legal clarification will therefore be necessary to ensure the provision delivers the intended level of market openness.

Steel and Aluminum Sustainability Requirements

The proposal also introduces specific sustainability requirements for steel and aluminum used in subsidized projects or public procurement, as outlined in Annex II. At least 25% of aluminum must be both low-carbon and of Union origin, while steel used in vehicles must meet a low-carbon threshold but is not subject to geographic sourcing restrictions.

This approach provides a degree of flexibility for automotive manufacturers, including those that rely on globally diversified steel supply chains. At the same time, the provision is likely to remain politically sensitive. Several stakeholders have already called for stricter Union-origin requirements for steel, reflecting concerns about the competitiveness of the European steel sector in the face of international competition.

Low-Carbon Steel Flexibility Mechanism

The EU will determine the technical definition of "low-carbon steel" through existing regulatory frameworks, including the Ecodesign for Sustainable Products Regulation (ESPR) and the Construction Products Regulation (CPR). In parallel, the automotive sector is expected to benefit from a dedicated flexibility mechanism: manufacturers will be able to offset up to 7% of their 2035 CO₂ targets through the use of low-carbon steel produced in the Union. This positions material sourcing as a potential compliance tool in the broader decarbonization transition.

"The Bad”: Areas of Concern

Despite these positive elements, the proposal introduces strict eligibility requirements for electric vehicles seeking "Made in the EU" status, outlined in Annex III (Parts II and III).

To qualify, electric vehicles must be physically assembled within the EU and either meet a 70% component ratio (excluding batteries) or use an EU-manufactured battery containing at least three specific locally produced components, including battery cells.

Beyond the assembly requirement, the proposal introduces three further areas of concern:

• Corporate fleet and CO₂ super-credits: eligibility is tied directly to EU-27 origin requirements under Articles 7, 13, and 14, effectively excluding vehicles assembled outside the European Union

• B2B leasing market access: this could limit access to corporate fleet support schemes in Member States and emissions-reduction flexibility mechanisms available to manufacturers ahead of the 2035 decarbonization targets

• Conditional equivalence withdrawal: under Articles 8.2 and 9.2, the Commission retains the authority to withdraw third-country equivalence through delegated acts where national treatment is deemed insufficient or supply-chain security concerns arise, introducing a potential long-term regulatory risk should trade tensions emerge 

"The Ugly”: Legislative Outlook and Strategic Engagement

With the Commission proposal now formally presented, the legislative process will move to the European Parliament and the Council, where Member States and MEPs will examine and amend the text. The definition of "Made in Europe" is widely expected to become one of the most contested elements of the negotiations.

Ensuring that the final legislation reflects the realities of Europe's cross-border automotive value chains will be a critical priority. Maintaining regulatory clarity and avoiding unintended fragmentation will be essential to safeguarding industrial competitiveness while supporting the EU's decarbonization objectives.

What This Means for the Automotive Industry

For the automotive sector, the Industrial Accelerator Act signals a broader shift toward industrial policy instruments that link sustainability objectives with supply-chain localization requirements. Manufacturers operating within Europe will increasingly need to navigate a complex interaction between carbon performance metrics, sourcing requirements, and eligibility criteria tied to industrial policy support mechanisms.

While the proposal acknowledges the importance of integrated supply chains, the current drafting risks introducing geographic constraints that could disrupt established production networks across Europe and its close trading partners. For global manufacturers, the ability to demonstrate compliance with emerging sustainability and sourcing requirements will become a key strategic capability in maintaining market access and regulatory flexibility.

The Role of Transparent Data and Cost Analysis

In this evolving regulatory landscape, transparent and verifiable data on material sourcing and carbon performance will play a decisive role in any compliance cost analysis. Policymakers are increasingly relying on detailed product-level information to determine eligibility for procurement frameworks, subsidies, and compliance flexibilities.

This is where Tset can play a critical role. Tset is a product costing and carbon footprint software built for manufacturers who need precise, traceable cost analysis across their entire supply chain.

By enabling transparent calculation of carbon intensity, material cost, and supply-chain composition, Tset's product costing software helps manufacturers:

• Run bottom-up should cost analyses and understand cost and carbon impact early in the product development process

• Connect cost and CO₂ data within a single, transparent calculation framework

• Make informed decisions about supply chain structure and sourcing as regulatory and sustainability pressures increase

• Bring transparency to the cost impact of specific regulatory requirements

• Build the internal evidence base needed to engage with compliance requirements in a credible and consistent way

The connection between product cost analysis and regulatory compliance has never been more direct. Manufacturers that can quantify and report their carbon footprint and material sourcing at the component level will be far better positioned to navigate IAA eligibility criteria and to influence the legislative debate with credible, data-backed arguments.