The EU built a wall around its car industry. Toyota and JLR say it will trap them inside.
A policy designed to protect European carmakers may be making their biggest problem worse
Brussels designed the Industrial Accelerator Act to protect the European car industry. Toyota and Jaguar Land Rover say it will do the opposite. The two manufacturers are among the most vocal opponents of the IAA, which the European Commission published at the end of March. Their warning is straightforward: force carmakers to source 70% of components from within Europe, and you raise costs, reduce investment and make European cars more expensive at exactly the moment they need to be cheaper.
What the IAA actually proposes
The Industrial Accelerator Act aims to increase demand for low-carbon, European-made technology and products. For cars, the core requirement is that at least 70% of components, excluding the battery, must be produced within Europe. Fleet cars and light commercial vehicles would additionally need to be assembled inside the EU to qualify for government contracts and subsidies.
The policy hits hardest at manufacturers who build cars for the European market from factories outside the EU. That means UK-based plants, Turkish facilities and Moroccan assembly lines are all at risk of falling outside the definition of European, regardless of how long those operations have been running or how many European jobs they support.
Toyota: this undermines investment, not protects it
Toyota employs 25,000 people across Europe and the United Kingdom, operating eight factories in the region. Its European chief Yoshihiro Nakata, speaking at an automotive event in Brussels attended by the Financial Times, was direct: the IAA risks undermining future investments, employment and technological development.
"Europe's resilience is not only based on local production, but also on collaboration with partners to create regional scale benefits and shared success," Nakata said. "By working together, we all stand stronger." The message behind the diplomacy is clear: Toyota's Burnaston plant in the UK, which builds the Corolla, could be shut out of European subsidy frameworks by rules that define the car as non-European. That is not a hypothetical risk for Toyota. It is the direct consequence of the IAA as currently written.
JLR: fix the competitiveness gap, not the address
Jaguar Land Rover, owned by India's Tata Motors and headquartered in Coventry, makes a different but complementary argument. The IAA, JLR says, does not address the underlying reasons why European cars are less competitive than Chinese ones. Forcing manufacturers to prove component origins adds administrative cost and compliance burden. It does nothing about energy prices, labour costs or the speed at which Chinese manufacturers can bring new models to market.
JLR's proposal: measure what a manufacturer contributes to EU exports, rather than where it assembles its cars. That is a subtler and more useful metric of economic contribution than a binary made-here test.
The industry is split
Not everyone agrees with Toyota and JLR. European supplier group Clepa actively supports strict made-in-Europe rules and wants rigorous enforcement. Their members stand to gain directly from any regulation that forces carmakers to source components locally. ACEA, the European manufacturers' lobby, takes a more nuanced position: it acknowledges the IAA will substantially raise production costs but broadly supports the policy's objectives, asking instead for supercredits and subsidies to help manufacturers and buyers absorb the price difference.
That position reveals the tension at the heart of the debate. The IAA will make European cars more expensive. That is not disputed. The question is whether the long-term industrial benefit justifies the short-term cost to consumers, fleet operators and taxpayers who would fund the subsidies.
AutoNext Take
The EU is trying to solve a real problem (European carmakers are losing ground to Chinese competitors who can build comparable cars for far less) but the IAA addresses the symptom rather than the cause. Making it harder to use non-European parts does not make European manufacturing cheaper. It makes the finished product more expensive, which is the last thing European consumers or fleet buyers need right now.
JLR's counter-proposal is worth taking seriously: measure economic contribution, not postcode. A carmaker that exports billions of euros from Europe, employs tens of thousands of European workers and invests in European R&D is doing more for the continent than a brand that simply assembles a car inside the border. The IAA should be measuring the right things. Right now, it is not.
