Industry Split Over EU Industrial Accelerator Act: Battery Sector Hopeful, Carmakers Wary About Exports

After the European Union (EU) unveiled its Industrial Accelerator Act (IAA), which contains the 'Made in Europe' strategy, responses from the domestic industry have been mixed. Battery manufacturers with existing production bases in Europe are hopeful that the act could present new opportunities, while the automotive sector, which manufactures vehicles in Korea for export, is expressing concern over the increased burden stemming from stricter local production requirements. The Korean government has also begun reviewing the main contents and potential impacts of the legislation to formulate a response.

On March 5, the Ministry of Trade, Industry and Energy, led by Policy Chief Park Dongil, held a meeting with representatives from the automotive, steel, and battery industries at the Korea Productivity Center to discuss the main provisions, sector-specific impacts, and response strategies related to the EU’s IAA draft.

The IAA, unveiled by the European Commission on the same day, focuses on applying ‘local manufacturing’ requirements to strategic manufacturing sectors such as automobiles, steel, cement, and aluminum, as well as eco-friendly industries like wind power, particularly in the context of public procurement and subsidies. Companies seeking to receive EU public funds must use a certain proportion of EU-manufactured components, and must also meet low-carbon production standards and local manufacturing requirements when participating in public procurement processes.

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In particular, for electric vehicles, a requirement that at least 70% of vehicle components be produced within the EU in order to qualify for subsidies could have an impact on the global automotive industry.

The IAA also includes regulations on foreign investment. In strategic manufacturing fields such as batteries, electric vehicles, solar power, and critical raw materials, companies from countries controlling more than 40% of global production capacity are required to meet certain conditions-such as employing at least 50% EU workers-when making investments exceeding 100 million euros, in order to receive investment approval. Provisions also allow for limiting foreign ownership to 49% or less, requiring participation in joint ventures, or mandating technology transfers.

Fortunately, the European Commission has stipulated that countries with which the EU has a Free Trade Agreement (FTA), or that are signatories to the World Trade Organization (WTO) Government Procurement Agreement (GPA) and guarantee market access for EU companies, will be treated equally with respect to EU products under the principle of reciprocity. As a result, Korean companies can maintain a certain level of market access, including in public procurement.

Industry reactions were divided. The automotive sector, which exports electric vehicles to Europe in finished vehicle form, believes that further action is needed since requirements for assembly within the EU remain in place. In contrast, battery manufacturers with production facilities in Europe expressed less concern.

An official from the Korea International Trade Association commented, "It seems we have avoided the worst-case scenario, as FTA partners will be treated on par with EU products. However, while Korea provides EV subsidies regardless of production location, the EU’s requirement for local production as a condition for subsidies runs counter to the principle of reciprocity. We will continue to raise this point throughout the EU’s legislative process."

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An official from the Korea Automobile Manufacturers Association also stated, "Europe continues to move toward greater protectionism. Domestic automakers such as Hyundai Motor Group should consider increasing production at their existing European plants or expanding further into the European market."

The three major Korean battery manufacturers with production facilities in European countries like Hungary and Poland are hopeful that this development could serve as a springboard for further expansion into Europe. SK On has battery plants in Komarom and Ivancsa, Hungary; Samsung SDI operates a plant in God; and LG Energy Solution is producing EV batteries in Wroclaw, Poland.

An industry insider said, "Korean battery companies maintain production plants in Europe and have established close cooperative relationships with several major finished vehicle manufacturers, which is expected to give them an advantage over Chinese battery firms. However, beyond regulatory frameworks, it will become even more important to secure fundamental technological and price competitiveness, as well as stable supply chains for raw materials."

Companies attending the meeting also emphasized the need to continuously monitor detailed regulations such as the local assembly requirements for electric vehicles and low-carbon steel standards. Hyundai Motor stated, "We are relieved that Korea is considered a reliable partner," and requested government support to ensure that assembly requirements within the EU might be relaxed in the future.

The government plans to consolidate industry feedback and convey Korea’s position to the EU at the Korea-EU New Trade Director-level meeting being held in Belgium today. The government intends to carefully review the legislative process to ensure that detailed requirements do not disadvantage Korean companies and to maintain close communication with the industry.

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