Europe Unshaken by China as Korean Car Giants Must Move Fast

Jakarta, CNBC Indonesia — The European Union’s proposed Industrial Accelerator Act (IAA), frequently described as Europe’s answer to the US Inflation Reduction Act, appears to be less aggressive toward Chinese electric vehicles than anticipated. Rather than curb China’s grip on the EV supply chain, the policy highlights how challenging it is for Europe to reduce its reliance on Chinese batteries and components. It could also pose new challenges for Korean carmakers and battery producers in the world’s second-largest EV market. According to The Korean Herald, the European Commission proposed the IAA on Wednesday, requiring that a minimum portion of production of electric vehicles, wind equipment, and other clean-energy technologies be undertaken in Europe when governments purchase or subsidise such products. The regulation is expected to take effect six months after adoption. The move is broadly interpreted as an early step to limit China’s expanding influence in the European EV market, where Chinese brands reached a record 12.8% market share in November last year, according to Bloomberg. Under the proposal, EVs purchased by European governments must undergo final assembly within the bloc. At least 70% of the components, excluding the battery, must also be produced in Europe. For now, the rules apply only to public procurement, which accounts for a small share of the broader EV market. However, analysts say the policy could eventually be extended to private-sector purchases. Lee Ho-geun, a professor of automotive engineering at Daeduk University, said the proposal marks Europe’s first attempt to introduce concrete local-content targets for EV procurement. ‘Although Europe currently applies this constraint only to public procurement, if local-component sourcing runs smoothly without major issues, there is more than 90 percent probability that similar rules will be extended to the private EV market,’ Lee told The Korean Herald, cited on Saturday (7/3/2026). However, the regulation reflects Europe’s dilemma in reducing dependence on China’s supply chain. ‘Exempting batteries from the 70% local-production requirement illustrates the reality,’ Lee said. ‘It is difficult for Europe to boost EV adoption without relying on cost-competitive Chinese-made vehicles.’ A total ban on Chinese-made batteries would likely burden consumers with higher costs, policymakers warn. Lee cited the UK’s 2023 decision to push back the net-zero vehicle target from 2030 to 2035 after officials warned that policy could add £5,000 to £10,000 to household bills (US$6,700–US$13,300). IAA still allows EVs equipped with Chinese-made batteries to qualify for public procurement as long as other requirements are met. This effectively allows suppliers such as CATL to continue exporting low-cost batteries to Europe, limiting the direct competitive edge for Korean battery manufacturers—LG Energy Solution, Samsung SDI, and SK On—despite their local production bases in Poland and Hungary. According to market research firm SNE Research, their combined market share fell from 71% in 2021 to 45.1% in 2024, when Chinese firms overtook them for the first time. In 2025, the figure fell further to around 35%. ‘Although the IAA is unlikely to have an immediate impact, it does not bode well for Korean battery producers,’ said an industry source who spoke on condition of anonymity. ‘The policy signals that Europe cannot ignore China’s price competitiveness in EVs and batteries.’ Nevertheless, the bill could still curb China’s expansion in Europe. The act states that investments exceeding £100 million from countries controlling more than 40% of global production capacity in a given sector — a threshold including China in EV batteries — could face additional scrutiny or restrictions, including limits on majority ownership. Such provisions could complicate further expansion by CATL, which already operates two battery plants in Europe and is constructing a third. Meanwhile, Hyundai Motor Company and Kia may face longer-term pressure than Korean battery makers. The two carmakers sold 183,912 EVs in Europe last year, with 82.8% exported from Korea. Although Hyundai and Kia operate production facilities in Nosovice, Czech Republic, and Zilina, Slovakia, most of their latest EV lines are still built in Korea, and much of their supply chains remain tied to Korean suppliers. ‘Although the 70% ’Made in Europe’ rule currently applies only to public procurement, Hyundai and Kia will likely need to accelerate localisation of EV production in Europe if the rules are extended to the private market,’ Lee said.