EU Auto Lobby Demands UK Exemption from ‘Made in Europe’ Subsidy Rules

The European automobile industry has urged Brussels to fully integrate the United Kingdom into new “Made in Europe” regulations, warning that the rules risk excluding British manufacturers from their largest export destination.

On Wednesday, the European Automobile Manufacturers Association (ACEA) appealed to the European Commission for “justified, targeted exemptions” for the UK, Turkey, and Morocco. The forthcoming regulations stipulate that vehicles and components must originate within the EU to qualify for subsidies or public procurement contracts.

Drafted under the Industrial Accelerator Act (IAA) to shield European industry from heavily subsidized Chinese imports, the rules inadvertently pose what could be the most severe Brexit-related blow to British manufacturers, as they currently apply exclusively to EU member states.

ACEA, a highly influential voice among European governments, stated: “The European automotive industry operates a deeply integrated value chain with the UK, even post-Brexit. Vehicles, components, and batteries produced in the UK should therefore hold the same status as those made in the EU27—with equal access to every policy instrument.”

The lobby group’s support bolsters the UK’s negotiating position as it seeks to mitigate the fallout. Britain’s Europe Affairs Minister, Nick Thomas-Symonds, met with EU Trade Commissioner Maroš Šefčovič on Wednesday to discuss the progression of UK-EU relations, with the IAA featuring prominently on the agenda.

Mike Hawes, Chief Executive of the UK’s Society of Motor Manufacturers and Traders (SMMT), welcomed the alignment, noting that the European industry’s stance reflects “the integrated nature of our respective automotive sectors” and aligns with the aspirations of European suppliers. “We trust European regulators will reflect this mutual interest in their final drafts,” he said.

Speaking at a London conference on Tuesday, Hawes warned that the regulations would “effectively shut out UK-assembled vehicles from most of the European market.” He argued this would constitute “one of the most spectacular own goals in history,” given that many British plants are European-owned and the UK and EU remain each other’s largest markets for cars and parts.

ACEA members BMW, Volkswagen, and Stellantis own the Mini, Bentley, and Vauxhall factories in the UK, respectively, while Jaguar Land Rover, Ford, and Toyota—also members—maintain significant UK manufacturing operations. Nissan, another member, has reportedly warned privately that it may be forced to close its Sunderland plant if the rules proceed unchanged. Over half of UK car exports are destined for the EU.

ACEA cautioned: “Excluding the existing factories of ACEA members, for instance, would strand European investments and weaken our competitiveness at the worst possible moment.”

The IAA is regarded as a critical trade instrument for the EU to stem the influx of Chinese components, which industry leaders argue threatens European industrial sovereignty. On Tuesday, the EU and China agreed to launch three months of diplomatic talks aimed at averting a trade war.

Last month, multiple European trade groups warned of domestic industry cannibalization in a phenomenon widely dubbed “China Shock 2.0″—starkly illustrated by Volkswagen’s proposal to cut up to 100,000 jobs in Europe. The trade deficit currently stands at €1 billion (£860 million) per day and is projected to approach €400 billion in China’s favour by year-end.

While ACEA is heavily influenced by its German members, the IAA is a French-driven initiative; any amendments will require the backing of President Emmanuel Macron.

Germany, whose automotive sector maintains extensive manufacturing operations in China, was recently urged by the Centre for European Reform think tank to “wake up” to the Chinese challenge, and the mobilization of industry voices appears to be gaining traction.

Following an EU leaders’ summit in June, German Chancellor Friedrich Merz proposed a “Plaza Accord”-style agreement to address Chinese trade practices. However, at last month’s G7 summit in France, he cited an “artificially low” yuan as a primary driver of China’s trade surplus.

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