The European Commission wants to push more manufacturing back into Europe by tying subsidies and public contracts to products made inside the EU under its proposed “Made in Europe” framework.
Presented on Wednesday as part of the Industrial Accelerator Act (IAA), the plan responds to growing concerns that Europe is losing manufacturing capacity to competitors such as China and the United States and becoming increasingly dependent on foreign supply chains.
At its core, the proposal would attach local content requirements to public procurement and subsidies in strategic sectors, including steel, aluminium, cement, electric vehicles and renewable technologies.
Companies seeking access to EU funds would need to demonstrate that a certain share of their production or components is made inside the European Union—or within a limited group of closely aligned countries.
Brussels wants manufacturing to represent 20% of EU GDP by 2035, up from roughly 14% today. Policymakers argue that without targeted intervention, Europe risks further deindustrialisation as geopolitical competition intensifies.
How the system would work
Under draft legislation, electric vehicles may need around 70% of their component value—excluding battery cells—to be produced within the EU to qualify for public subsidies.
Minimum shares of EU-produced low-carbon materials, such as green steel, would also be required in certain sectors, although some of the initially proposed thresholds appear to have been lowered during negotiations.
The Act would also introduce stricter screening of large foreign investments in emerging industries such as batteries and EV manufacturing. Investors from countries that dominate global production capacity could face conditions including limits on ownership stakes, requirements to employ EU workers and obligations to transfer technological know-how to European partners.
The Commission says these measures are a pragmatic response to global realities. The United States has tied subsidies to domestic production under the Inflation Reduction Act, while China has long supported key industries through state-backed industrial policy. Brussels argues that European taxpayers’ money should reinforce domestic capacity rather than subsidise foreign overproduction.
Why there is pushback
Despite these arguments, the proposal has generated resistance on several fronts.
Within the EU, member states are divided. France has championed a more protectionist approach, insisting that strong local mandates are necessary to preserve European industry. Germany, by contrast, is more cautious. Its export-oriented economy—particularly its automotive sector—relies heavily on access to foreign markets, including China. Berlin fears that strict local content rules could provoke retaliation and escalate trade tensions.
Beijing has already responded forcefully to EU tariffs on Chinese-made electric vehicles. Additional measures seen as protectionist could trigger countermeasures affecting European exports.
There is also disagreement over how narrowly “European” should be defined. Some countries favour limiting eligibility to the EU and the European Economic Area. Others advocate including partners such as Britain or Turkey, whose manufacturing sectors are deeply integrated with EU supply chains. Excluding them could disrupt existing production networks and discourage investment.
Industry stakeholders are similarly divided. Some European suppliers argue that mandatory local content is essential to prevent factories relocating to lower-cost jurisdictions. They warn that without intervention, Europe could lose further capacity in sectors critical to the green transition.
However, multinational manufacturers stress that global supply chains are highly complex. Working out exactly how much of a product is “European” is complex, and rigid thresholds may increase costs or reduce flexibility. Some business groups also argue that the EU already possesses trade defense tools to counter unfair subsidies without introducing explicit local production mandates.
The proposal will now be negotiated by the European Parliament and member states, where significant amendments are likely. The final outcome will determine whether “Made in Europe” becomes a new pillar of European industrial policy—or a flashpoint in Europe’s relations with its trading partners.
