The European Union’s proposed Industrial Accelerator Act, or IAA, is raising concerns across the auto industry. If the rules take effect as planned, electric-vehicle makers seeking EU subsidies would have to produce at least 70% of a vehicle’s parts in the EU. Hyundai Motor Group, which exports most of its EVs sold in Europe from South Korea, says it will reorganize its European plants around EV production to meet the new requirements.
On March 5, the European Commission announced the IAA, which would apply “made-in-region” requirements to public procurement and subsidies in strategic sectors including autos, steel, cement and aluminum, as well as green industries such as wind turbines. Under the proposal, exporters would need to meet minimum EU-content thresholds to qualify for public funding. The bill also includes foreign direct investment rules requiring, in certain cases, that EU workers make up at least 50% of the workforce, foreign ownership be capped at 49%, and technology transfer be required when a country accounting for more than 40% of global production capacity invests more than 100 million euros in Europe.
Automakers are most focused on 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 at least 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, calling the measure an unfair new penalty on exports compared with South Korea, which provides subsidies regardless of where a vehicle is made. The official added that it was a relief the origin rules broadly recognize not only EU member states but also countries that have free trade agreements with the EU.
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 weighted toward internal-combustion models. Key EV models such as the Ioniq 5 and 6 and the EV5, EV6 and EV9 are produced in South Korea and exported.
Hyundai and Kia said they will steadily expand EV production models in Europe this year. Hyundai plans to begin full-scale mass production of the Ioniq 3 at HMTR in August and is pursuing equipment conversions 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 producing the EV2 this year, aiming to build a system to produce 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.
* This article has been translated by AI.
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