Automakers Split on Made in EU Procurement Initiative

Major automotive manufacturers including Toyota and Jaguar Land Rover have raised concerns that the European Union's "Made in Europe" initiative could threaten both manufacturing and jobs, reshaping procurement strategies and supply chain decisions across the automotive sector.

The Industrial Accelerator Act (IAA), proposed by the European Commission, has divided industry opinion and could potentially impact how billions of euros in public procurement spending are allocated.

JLR, owned by India's Tata Motors, warned that the regulations could make cars produced in Europe even more expensive than Chinese vehicles, creating significant cost implications for procurement teams.

The economic thinktank Bruegel suggests the IAA could affect billions of euros in annual subsidies and public procurement spending.

The UK's largest trade association, the SMMT, has called on the EU to amend its proposed IAA to keep the UK automotive sector as a "Made in Europe" partner, highlighting concerns about supply chain continuity for procurement professionals.

The European car industry remains split over "Made in the Europe" manufacturing targets, with Volkswagen, Stellantis and Renault recently joining forces to argue in favour of the plan, while others express reservations about its impact on sourcing flexibility.

Investment and jobs

Speaking at an automotive event in Europe, Yoshihiro Nakata, President & CEO of Toyota Motor Europe expressed Toyota’s fears that excluding key international partners in the automotive sector could undermine future investment, employment and technology transfer, while reducing the regional scale considered necessary to effectively compete globally.

He said: “We believe that selected critical partners, for instance the UK, Japan and Turkiye, should be recognised in the same way as ‘Made in EU’ under the IAA.

"Europe's resilience is built not only on local production, but also on working with partners to create regional scale and shared success. By working together we are all stronger."

According to the Financial Times, JLR says: "The IAA layers incremental costs on to manufacturers and would make European cars more expensive. It does nothing to address the underlying structural differences that make European manufacturing less competitive than China."

For procurement professionals managing automotive purchases, these comments could signal potential price increases and limited supplier options.

Additionally, Nissan could close its Sunderland plant if the UK were to be excluded from the "Made in Europe" rules, according to a report in The Guardian, which could mean significant disruption to existing supply agreements.

Understanding the procurement framework

The IAA, proposed by the European Commission, is a framework designed to accelerate industrial investment and decarbonisation in strategic sectors, including the automotive industry. It also includes steel, cement and aluminium.

It rests on three main pillars: faster permitting for industrial projects, creating lead markets for clean industrial projects and strengthening investment in strategic sectors.

Part of the framework includes a "Made in Europe" initiative in public procurement that could see the UK and other countries excluded from incentives offered to EU based manufacturers. Under the proposed legislation, in public procurement and support schemes, vehicles would have to be assembled in the EU and a minimum 70% of the components, excluding the battery, would have to be of EU-origin to qualify.

Bruegel says the IAA is controversial because of disagreement over the degree to which the EU should introduce protectionist measures to shield domestic industry from foreign competition.

Industry division on procurement rules

The auto industry is split over the IAA, with Volkswagen, Stellantis and Renault recently making a joint statement to push for "Made in Europe" manufacturing targets that would directly affect procurement qualification criteria.

In a joint statement, the companies which combined represent more than 60% of EU vehicle production, said: "'Made in Europe' must support competitiveness, attract investment and recognise the cost gap we face versus global competitors."

China is considered the largest global competitor to European carmakers. More than one million new vehicles were imported into the EU from China in 2024, according to statistics published by Acea.

The three companies continued in a statement: "If we get this right, Europe can remain a global automotive powerhouse. We are calling on our EU institutions to create a framework aimed at achieving that 70% of the vehicles, carmakers sell in Europe, include this content in the EU's 27 member states."

The SMMT weighed in on the matter earlier this year. In April 2025, the organisation argued that the "Made in Europe" regulation, as is currently drafted, would exclude the UK from incentives offered to EU manufacturers, potentially limiting procurement options for buyers with established UK supplier relationships.

Mike Hawes, SMMT Chief Executive, said: "If the IAA proceeds as drafted, it threatens to reverse progress, undermining the Trade and Cooperation Agreement all sides worked so hard to deliver and jeopardise our respective competitiveness, damaging to jobs, investment and innovation."