The European Union’s proposed Industrial Accelerator Act, or IAA, is raising concerns across the auto industry. If the IAA is implemented, South Korean EV makers seeking EU subsidies would have to meet a local-content threshold, including producing at least 70% of vehicle parts in the EU. Hyundai Motor Group, which exports most of the EVs it sells in Europe from South Korea, plans to shift its European plants toward EV production to counter the new rules.
On March 5, the European Commission announced the IAA, which would apply “made-in-region” requirements to public procurement and subsidies in strategic sectors such as autos, steel, cement and aluminum, as well as green industries including wind turbines. Under the proposal, companies exporting to Europe would need to meet minimum EU-origin parts standards to receive EU public funding. The bill also includes foreign direct investment rules requiring that when a country accounting for more than 40% of global production capacity invests more than 100 million euros in Europe, the share of EU workers be set at 50% or more, foreign ownership at 49% or less, and technology transfer obligations be imposed.
Automakers are most concerned about the “70% EU origin” requirement. Under the IAA, consumers buying EVs and hybrids in Europe would qualify for government subsidies only if the vehicle is assembled in the EU and more than 70% of parts — excluding the battery — are produced in the EU, among other conditions. An industry official said most automakers, including Hyundai and Kia, supply the bulk of their European EV sales through exports. “Unlike South Korea, which provides subsidies regardless of where a vehicle is made, Europe is creating a new export penalty that did not exist before, making it highly unfair to domestic companies,” the official said. The official added that it was “a relief” that the origin criteria broadly recognize not only EU member states but also countries with free trade agreements.
Hyundai and Kia sold 183,912 EVs in Europe last year, but locally produced vehicles accounted for only 17.2%, or 31,722 units. Hyundai currently has two European production bases — Nosovice, Czech Republic (HMMC) and Izmit, Turkiye (HMTR) — while Kia operates one in Zilina, Slovakia (KMS). Annual capacity is about 300,000 vehicles at HMMC; roughly 200,000 to 240,000 at HMTR; and about 350,000 at KMS, but production is heavily focused on internal combustion models. Key profit-driving EVs such as the Ioniq 5 and 6 and the EV5, EV6 and EV9 are produced in South Korea and exported.
Hyundai and Kia plan to steadily expand EV models produced in Europe this year. Hyundai plans to begin full-scale mass production of the Ioniq 3 at HMMC in August, and is converting HMTR — previously centered on internal combustion vehicles — with a goal of producing 200,000 EVs a year. Kia began mass production of the EV4 at KMS in August last year and plans to start EV2 production this year, aiming to build a system capable of producing more than 100,000 EV2s annually by 2027. A Hyundai-Kia official said the group will accelerate electrification of its European plants in line with the pace of the IAA and “maintain market share” by producing a wider range of EVs within Europe for the European market.
* This article has been translated by AI.
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