İKV Uzmanı Ahmet Emre Usta tarafından kaleme alınan “Made in EU and Its Impact on Türkiye and the Turkish Automotive Sector” başlıklı İngilizce değerlendirme, İKV Brief serisinden yayımlandı. Bu değerlendirme notunda, AB’nin Sanayi Hızlandırma Yasası ile sanayi politikasında yöneldiği yeni müdahaleci çerçeve; izin süreçlerinin hızlandırılması, kamu alımları ve destek programlarında Birlik menşeli üretimi önceleyen “Made in EU” gereklilikleri ve yabancı doğrudan yatırımlara getirilen koşullar üzerinden inceleniyor. Ayrıca, Türkiye menşeli bileşenlerin belirli koşullarda Birlik menşeli kabul edilmesine karşın Türkiye’de monte edilen araçların “Birlik içinde monte edilme” şartını karşılamaması nedeniyle Türk otomotiv sektörünün üretim, ihracat ve yatırım açısından karşı karşıya kalabileceği riskler değerlendiriliyor.

Made in EU and Its Impact on Türkiye and the Turkish Automotive Sector

Ahmet Emre Usta, IKV Researcher

In the face of an increasingly fierce global competitive environment, the EU stands at a critical juncture where it must urgently address the structural contraction in its industrial output, its growing external dependence in critical technologies, and the bottlenecks impeding green transition investments. A prolonged decline in manufacturing output, mounting dependencies on external suppliers of critical technologies and raw materials, and persistent investment gaps in the green transition have together exposed structural weaknesses that can no longer be addressed through incremental policy adjustments. Reflecting this trend, manufacturing's contribution to EU GDP has fallen from 17.4% in 2000 to 14.3% in 2024, raising growing concerns over Europe's future capacity to sustain productivity growth, high-quality employment, technological leadership, and economic sovereignty.

This deterioration is the product of several mutually reinforcing structural pressures. Surging global energy prices are undermining the competitiveness of energy-intensive industries. The overcapacity generated by China’s state-subsidised industrial policies and its aggressive export strategy are sharpening price competition within the EU market and squeezing the profitability of domestic producers. The concentration of more than 80% of battery manufacturing capacity and solar photovoltaic production in China has created the risk that Europe may be compelled to procure even the technologies essential for its own green transition from external sources. In the automotive sector, the fundamental reshaping of value chains driven by the transition to electric vehicles is leading to a steady decline in the proportion of Union-origin components in cars manufactured within the EU. Forecasts indicate that half of European automotive suppliers are planning to scale down their production capacities in the EU in the coming years. Alongside these developments, geopolitical vulnerabilities -such as the reality of energy dependence exposed by the Russia-Ukraine war, the weaponisation of economic dependencies, and the exposure of supply chain fragilities in the aftermath of the COVID-19 pandemic- have now elevated the link between the EU’s economic security and its industrial capacity to a critical security issue.

The decarbonisation front presents an equally concerning picture. Production volumes in energy-intensive industries have declined markedly since 2021, with capacity utilisation rates dropping to unsustainable levels. Even more concerning is that over half of the announced decarbonisation projects have failed to materialise since 2023. Lengthy and unpredictable permitting procedures, high investment costs, insufficient demand for low-carbon products, and the reluctance of downstream sectors to absorb the additional costs associated with green production are driving these projects into a structural impasse.^[1] Indeed, if an industrial facility invests in decarbonisation, its inability to differentiate its higher-cost, low-carbon product in the market -meaning it remains indistinguishable from its high-carbon equivalent- fundamentally calls the business case of such investments into question.

Against this backdrop, the European Commission adopted the proposal for the Industrial Accelerator Act (IAA) on 4 March 2026, taking a critical step to transform the continent’s industrial infrastructure and enhance its economic security. Published as a proposal for a regulation, this Act is the legal manifestation of the political commitment announced by Commission President von der Leyen in her 2025 State of the Union address. Furthermore, the Act translates the policy vision set out in the Clean Industrial Deal into concrete legal norms and is directly linked to the EU’s European Economic Security Strategy, the Competitiveness Compass, and the European Automotive Sector Action Plan. The primary objective of the Industrial Accelerator Act is to increase the share of the manufacturing industry in the EU’s GDP to 20% by 2035. To achieve this target, the Act is built upon four mutually reinforcing mechanisms.

According to the Impact Assessment Report^[2] published alongside the Regulation proposal by the European Commission, the Industrial Accelerator Act will generate approximately 8 billion euros in net benefits for the EU economy in 2030; contribute to the creation or retention of 148,352 jobs; achieve an emission reduction of 30.58 million tonnes of CO² equivalent; and generate roughly 240 million euros in cost savings from the digitalisation of permitting procedures. On the other hand, these benefits will be accompanied by certain compliance costs in downstream sectors. Indeed, the price of a vehicle in the automotive sector could increase by an average of 630 euros due to battery requirements, while building costs in the construction sector could rise by approximately 0.45%. However, it is anticipated that these costs will decrease in the medium term as economies of scale in production are achieved -that is, as per-unit costs decline in parallel with rising production volumes- and will be offset by long-term benefits such as economic security, supply chain resilience, and job creation.

Ultimately, the Industrial Accelerator Act is a holistic industrial policy step through which the EU aims to simultaneously achieve multiple macro-strategic objectives. The Regulation will improve the investment climate by overcoming bureaucratic bottlenecks in permitting procedures, utilise the purchasing power of the Single Market as a strategic lever to create guaranteed demand for Union-origin production, and enable technology transfer by subjecting foreign investments to the principle of conditionality.

1. Acceleration and Digitalisation of Permitting Procedures

Perhaps the most concrete and rapidly impactful pillar of the Industrial Accelerator Act is the fundamental transformation it brings to the permitting procedures for industrial projects. The Act aims to systematically eliminate the bureaucratic obstacles hindering manufacturing investments across Europe.

Today, investors wishing to establish, expand, or transform an existing industrial facility for decarbonisation purposes in Europe are obliged to apply separately to multiple independent authorities and complete distinct permitting and authorisation procedures individually. These multi-layered procedures -ranging from building permits and environmental assessments to chemical authorisations and grid connection permits- vary significantly across Member States, condemning project promoters to an uncertain waiting period that can span years. This situation bears much heavier consequences, particularly for SMEs, which possess limited administrative resources. The Industrial Accelerator Act addresses this structural issue through three primary mechanisms.

1. Digital Single Window System

Under the Regulation, each Member State will be obliged to establish a digital single access point at the national level. Built upon the European Business Wallets infrastructure, this access point will enable project promoters to submit all permitting applications through a single digital platform, facilitate the automatic sharing of relevant documents and data among competent authorities, and ensure the transparent tracking of every stage of the process. One of the most critical innovations of the system is the principle of "data reuse," which precludes the re-requesting of data and documents previously submitted to public authorities. Designed in alignment with the "once-only" principle, this mechanism will spare businesses from having to repeatedly submit the same information to different authorities. Furthermore, structuring the system around the principle of interoperability will enable an automatic data flow between competent authorities, thereby reducing the administrative burden while simultaneously accelerating decision-making processes.

1. Consolidated Permitting Procedure Based on a Single Application

The Regulation lays down a consolidated permitting procedure based on a single application for all manufacturing projects, apart from the tobacco sector. Through this provision, project promoters will be able to request all the permits required for the construction, expansion, conversion, or operation of an industrial facility via a single application. Each Member State will designate a competent authority to coordinate this consolidated procedure and to issue a comprehensive decision within the applicable time limits.

The Regulation sets strict limits on the timeline of the procedure. The competent authority will be obliged to acknowledge the completeness of the application or to request any missing information within 45 days of its receipt. A request for missing information may be made a maximum of two times, and the second request may only relate to matters not covered in the initial request. A 30-day time limit is envisaged for the second request.

On the other hand, if specific permitting procedures are already laid down for certain industrial sectors in other EU legislation, these sectors will be excluded from the scope of the permitting procedure in question. Projects falling under the Net-Zero Industry Act or the Critical Raw Materials Act, alongside the pharmaceutical and medical device sectors, are included within this exception.

1. Strategic Status for Energy-Intensive Industry Decarbonisation Projects

One of the most significant structural innovations introduced by the Regulation is the fundamental shift it brings to the standing of decarbonisation projects in energy-intensive industries within permitting procedures. Under the Regulation, the accelerated permitting provisions of the Net-Zero Industry Act, which previously applied exclusively to net-zero technology manufacturing projects, will henceforth apply to all energy-intensive industry decarbonisation projects. The significance of this provision lies in its resolution of a severe inequality within the current system. Indeed, up until now, while energy-intensive facilities integrated into the net-zero technology supply chain could benefit from accelerated permitting procedures, facilities operating in the same sector but not directly manufacturing net-zero technology components were excluded from this scope.

Furthermore, all such projects will acquire "strategic project" status under the Regulation on Speeding-up Environmental Assessments. This status will allow the projects to benefit from a streamlined toolkit during their environmental assessment processes. Consequently, projects such as a steel plant installing a carbon capture system, a cement facility converting its production line to low-carbon technology, or an aluminium plant undertaking an electrification investment will now be able to benefit from the accelerated environmental assessment procedures granted to net-zero technology projects.

2. Strengthening the EU’s Strategic Value Chains: “Made in EU” and Low-Carbon Requirements

Public procurement accounts for approximately 15% of the EU’s GDP, and strategically leveraging this massive purchasing capacity holds the potential to both accelerate the decarbonisation of European industry and reduce its external dependence. Accordingly, the Industrial Accelerator Act aims to harness this potential through two fundamental mechanisms: Union origin requirements (Made in EU) and low-carbon product requirements. By creating guaranteed demand for products manufactured in Europe with a low carbon footprint through public procurement, support programmes, and auctions, these two mechanisms aim to fundamentally scale up decarbonisation investments.

1. Made in EU: The Concept and Legal Framework

At first glance, the term Made in EU might be perceived as a simple origin label affixed to a product. However, within the scope of the Industrial Accelerator Act, this concept possesses a much more comprehensive and multi-layered structure. For a product to be considered of Union origin, it must comply with the non-preferential rules of origin defined in EU customs legislation. In practice, this means that the product’s last substantial transformation -that is, the core manufacturing stage that brings the product to its final form- must have taken place within the territory of the Union. Nevertheless, the Regulation goes beyond this fundamental principle, laying down specific thresholds of varying depths for each product category. So much so that while the customs rule of origin may suffice for a simple industrial product, in the case of an electric vehicle, the place of assembly, component-based price ratios, and the obligation for certain critical components to be individually of Union origin are concurrently required. Therefore, Made in EU is not a uniform stamp applied to a product, but an origin verification mechanism that deepens progressively according to the strategic importance of the product and the complexity of its supply chain. All these requirements will come into effect not simultaneously, but through differentiated, phased timelines.

1. Equivalent Origin System

The origin requirements laid down by the Regulation do not render Europe a completely closed system. In public procurement, content originating in countries that have established a free trade agreement or a customs union with the EU, or countries that are parties to the WTO Agreement on Government Procurement (GPA), will be considered of Union origin. In support programmes and auctions, the scope is narrower. Only the content of free trade agreement or customs union countries will be considered equivalent; the GPA scope does not apply here. On the other hand, the Commission will be empowered to exclude any third country from the scope of equivalence by means of a delegated act. This power may be exercised in cases where the country in question fails to provide national treatment to EU products, where security of supply is under threat, or where an exception under the relevant agreement is deemed necessary.

1. Definition of Low-Carbon Products and Classification System

Alongside the Made in EU requirements, the Regulation also lays down standards for certain products to be considered “low-carbon”. The attainment of low-carbon status by an industrial product is conditional upon full compliance with the technical criteria set out in the delegated acts to be published under the relevant legislation. For products falling under the Construction Products Regulation (2024/3110), the definition of low-carbon will be determined in accordance with this Regulation, whereas for other products, it will be determined in accordance with the Ecodesign for Sustainable Products Regulation (2024/1781). Furthermore, the Commission is empowered to establish voluntary classification systems based on greenhouse gas intensity for industrial products manufactured through activities covered by the EU ETS.

1. Energy-Intensive Industrial Products: Steel, Concrete and Aluminium

Energy-intensive industries constitute one of the fundamental pillars of the EU economy. They occupy a strategic position, providing inputs to numerous industrial ecosystems ranging from construction to automotive, and from energy to defence, thereby feeding a broad spectrum of downstream sectors. However, these sectors account for approximately 22.3% of the EU’s total greenhouse gas emissions and are losing their competitiveness under the combined impact of high energy prices, the need for large-scale decarbonisation investments, and unfair global competition. Production volumes in the respective sectors have declined markedly since 2021, the cost gap with other actors has widened, and import shares have increased, particularly in base metals and chemicals. In this context, the Regulation will introduce low-carbon requirements, Union origin requirements, or both, in public procurement and support programmes for basic industrial products such as steel, concrete/mortar, and aluminium.

1. Requirements in Public Procurement

With effect from 1 January 2029, in public procurement procedures falling within the scope of Directives 2014/23/EU, 2014/24/EU and 2014/25/EU that exceed the thresholds laid down in those Directives and where the contracts include the procurement of products from energy-intensive industries, the following minimum percentage shares shall become a mandatory part of the technical specifications:

• Steel Sector: For steel, and any product the performance of which depends mainly on steel, intended for use in buildings, infrastructure and motor vehicles for civil purposes, at least 25% of the total volume of steel used shall be required to be low-carbon. It is noteworthy that a Union origin requirement has not been introduced for steel. The primary reason for this is that a separate trade measure has already been proposed to address the adverse impacts of global overcapacity on the EU steel market.
• Concrete and Mortar: For concrete and mortar, and any product the performance of which depends mainly on concrete and mortar, two requirements are sought concurrently. It will be mandatory that at least 5% of the total volume of concrete and mortar used, including the clinker and cement used to produce them, intended for use in buildings and infrastructure for civil purposes shall be low-carbon and of Union origin. Keeping this rate at a relatively modest level of 5% aims to establish a starting point proportionate to the sector’s current production capacity and technological readiness level.
• Aluminium: For aluminium, and any product the performance of which depends mainly on aluminium, the bar has been set higher. At least 25% of the total volume of aluminium used, intended for use in buildings, infrastructure and motor vehicles for civil purposes, must be low-carbon and of Union origin. The rationale for this requirement is that aluminium is a highly electro-intensive industrial product and is recognised as a strategic raw material.
  1. Requirements in Support Programmes

The Regulation transposes these quotas, designed for public procurement, to the state support programmes of Member States at the exact same rates. For incentive schemes established or updated on or after 1 January 2029, support for the construction or renovation of buildings for residential and commercial purposes, infrastructure, and the lease and purchase of motor vehicles for civil purposes will be directly brought within the scope. Within the framework of these programmes, a 25% low-carbon requirement for steel; and a combined low-carbon and Union origin requirement of 5% for concrete and mortar, and 25% for aluminium, will be sought. The most strategic rule introduced by the Regulation emerges in budget allocation. Member States will be obliged to subject at least 45% of the total national budget allocated to these support programmes to these strict requirements.

1. The Automotive Sector: Comprehensive Made in EU Requirements

Beyond being one of the leading sectors of the EU economy, the automotive industry stands out as the area where electrification is unfolding most intensely and where the supply chain is being reshaped most fundamentally. This transformation, however, also brings serious vulnerabilities for the European automotive industry. Europe’s decades-long technological supremacy in conventional internal combustion engine cars is being eroded as new value components -such as batteries, e-powertrain components and electronic systems- gain weight in electric vehicles. Indeed, the EU content of cars manufactured in the EU is steadily declining. The average profitability of European automotive suppliers, which stood at 7.4% in 2017, fell to 5% by 2023. Moreover, more than 100,000 job cuts were recorded in the automotive sector over the 2024-2025 period. Against this backdrop, the Industrial Accelerator Act introduces comprehensive and detailed Made in EU requirements for cars.

1. Requirements in Public Procurement

Under the new public procurement rules, a new era will begin six months after the Regulation enters into force, within the framework of Directive 2014/24/EU, which governs general public procurement in the EU, and Directive 2014/25/EU, which covers procurement in infrastructure sectors such as water, energy and transport. Accordingly, new pure electric vehicles (PEV), off-vehicle charging hybrid electric vehicles (OVC-HEV) and fuel cell vehicles (FCV) that are purchased, leased or used in the provision of services under public procurement procedures falling within the scope of these instruments will be subject to a multi-layered origin verification system.

The first and indisputable precondition is that the vehicle is assembled within the Union. In addition, excluding the battery, at least 70% of the total ex-works price of all the components making up the vehicle must be of Union origin. This ratio effectively requires the vehicle’s main body, mechanical components and interior fittings to be produced largely within the European supply chain. On the traction battery side, at least three main specific components of the battery -among them the battery cells- are required to originate in the Union. These requirements will take effect immediately, six months after the Regulation enters into force.

Three years later, the requirements will become considerably more stringent. On the battery side, the number of components required to be of Union origin will rise to five. In addition to the battery cells, the cathode active material -one of the most costly and most strategic components of the battery- and the battery management system will also be added to the list of mandatory Union-origin components. Furthermore, at least 50% of the ex-works price of the e-powertrain components -such as power electronics, electric drive motors, e-axles, rotors and stators- will have to be of Union origin. Similarly, at least 50% of the total ex-works price of the main electronic systems -such as advanced driver assistance systems, central computing units, wireless access systems, in-vehicle infotainment equipment and chassis electronics- must be sourced from within the Union.

1. Mitigated Requirements for Small Electric Vehicles

The Regulation provides for a more flexible criterion for small electric vehicles of subcategory M1E. While assembly within the Union remains mandatory for these vehicles, meeting only one of two alternative conditions will be deemed sufficient. These are: that at least 70% of the ex-works price of the components, excluding the battery, is of Union origin; or that the traction battery contains at least three main specific components, including the battery cells, originating in the Union. While this flexibility is intended to keep small and affordable electric vehicles accessible on the EU market, the aim is also to prevent market dominance in this strategic segment from passing into the hands of imported brands. Indeed, the small and affordable segment stands out as the area where Chinese manufacturers compete most aggressively.

1. Manufacturer-Level Flexibility Mechanism

The Regulation also includes a pragmatic flexibility mechanism that allows manufacturers to be assessed based on their total production volume. If a vehicle manufacturer demonstrates that at least 85% of all the PEV, OVC-HEV and FCV it assembled within the Union in the previous calendar year complied with the Union origin requirements, all vehicles placed on the market by that manufacturer over the following 12-month period will be deemed compliant.

1. Support Programmes and Corporate Vehicles

Six months after the Regulation enters into force, the same multi-layered origin requirements as in public procurement will be introduced for programmes that support the purchase or lease of new PEV, OVC-HEV or FCV. Accordingly, it is mandatory that the vehicle be assembled within the Union, that at least 70% of the total ex-works price of the components excluding the battery be of Union origin, and that the traction battery contain at least three main components, including the battery cells, originating in the Union. In the second phase, which will take effect three years later, the number of components required to be of Union origin in the battery will rise to five -with the cathode active material and the battery management system added- and a minimum 50% Union-origin ratio will also be required for the e-powertrain components and the main electronic systems. The relaxed requirements for small electric vehicles and the manufacturer-level 85% flexibility mechanism will apply in exactly the same way to support programmes. Member States are required to make 100% of the total national budget of their support programmes subject to these requirements.

Another important dimension of the Regulation is its direct link to the proposal for a Regulation on clean corporate vehicles of 16 December 2025. That proposal limits the financial support provided to corporate cars and light commercial vehicles to zero- and low-emission vehicles and provides for this support to be directed towards vehicles that meet the “made in the European Union” criterion. Under the Industrial Accelerator Act, companies wishing to benefit from corporate-vehicle incentives must meet the same assembly, component-origin and battery requirements.

1. Net-Zero Technologies: Phased Union Origin Requirements

The third pillar of the Industrial Accelerator Act’s Made in EU architecture is the Union origin requirements introduced for net-zero technologies. Net-zero technologies play an important role in the EU’s pursuit of its energy and climate objectives, yet the EU faces serious external dependency in terms of the manufacturing capacity for these technologies. More than 80% of battery manufacturing capacity and of solar photovoltaic production is concentrated in China. In heat pumps and geothermal technologies, EU production is largely dependent on components from non-EU suppliers. In wind technologies, meanwhile, the cost pressure arising from low-priced Chinese imports is steadily intensifying. This picture clearly shows that Europe has become unable to produce even the technologies it needs for its own green transition.

The new provisions added to the Net-Zero Industry Act (Regulation (EU) 2024/1735) under the Regulation introduce, in order to avert this risk, phased technology-specific Union origin requirements in public procurement, auctions, support programmes and Member State-supported construction and manufacturing projects.

1. Requirements in Public Procurement

For battery energy storage systems, in the first phase -beginning one year after the Regulation enters into force- the system itself must be of Union origin, and for projects above 1 MWh the battery management system must also be of Union origin. In the second phase, beginning three years later, the 1 MWh threshold will be removed, the battery management system will be made mandatory for all projects, and the battery cells together with one further main specific component will be added to the requirements. For solar photovoltaic (PV) technologies, three years after the Regulation enters into force, the PV inverters and PV cells (or equivalent components) will be required to be of Union origin. For hydronic heat pumps, again three years after the Regulation enters into force, the entire product will have to be of Union origin. For onshore and offshore wind technologies, at least one main specific component will be required to be of Union origin in the first phase -beginning one year after the Regulation enters into force- and two main specific components three years later. For nuclear fission technologies, four years after the Regulation enters into force, at least two main specific components -and six years later at least three- will be required to be of Union origin in new nuclear power plant projects, including small modular reactors (SMRs). It is expressly stated that the nuclear requirements will not apply to the refurbishment or lifetime extension of existing plants, and that R&D and first industrial deployment projects will likewise be excluded from the scope.

1. Requirements in Auctions

In renewable energy auctions, the Union origin requirements are structured in parallel with public procurement but designed to reflect the specific characteristics of auctions. For battery energy storage systems and wind technologies, the same phased requirements as in public procurement will apply. For solar photovoltaic technologies, a Union origin obligation for PV inverters and PV cells will be introduced three years after the Regulation enters into force. For the hydrogen sector, a detailed auction-specific structure has been devised. One year after the Regulation enters into force, the electrolyser used in hydrogen production will be required to be of Union origin, as will the cell stack and one further main component; three years later, the number of additional components will rise to two.

As regards the breadth of scope of auctions, the Regulation considerably strengthens the existing rules. Accordingly, the origin requirements in question are made mandatory for at least 40% of the total annual volume of auctions or, alternatively, for at least 8 GW of capacity per Member State per year. This ratio clearly exceeds the 30% threshold under the existing Net-Zero Industry Act and aims to prevent the excessive use of exemptions, thereby encouraging the production of Union-origin renewable energy technologies.

1. Requirements in Support Programmes

In net-zero technology support programmes aimed at households and companies, the same phased requirements as in public procurement will apply to battery energy storage systems and solar photovoltaic technologies. For hydronic heat pumps, the entire product will have to be of Union origin after three years. However, in order to offset the potential cost increase that the Union-origin product obligation may pass on to consumers, the Regulation sets a clear ceiling on the “additional financial compensation” mechanism that Member States may provide. This additional incentive, paid by the state to citizens in order to support domestic production, may not exceed 15% of the final product cost. For schemes aimed at low-income citizens experiencing energy poverty, this limit will be 20%.

3. The Conditionality Framework for Foreign Direct Investment

In recent years, concerns that large-scale foreign investment -particularly in strategic sectors- fails to deliver the expected added value to Europe have steadily intensified. Some investments are made without technology transfer, creating limited employment and without sufficient integration into EU value chains. This results in the added value generated by the investment remaining outside the borders of the Union. Moreover, unconditional large investments from countries holding a very large share of global manufacturing capacity carry the potential to disrupt security of supply and weaken technological progress in the EU’s emerging strategic sectors. The differing conditions that Member States apply to such investments, in turn, fragment the Single Market, create unequal conditions among investors and generate an incentive to gravitate towards the Member State offering the lowest standard. The Industrial Accelerator Act aims to resolve this structural problem through a harmonised conditionality framework.

1. Scope and Thresholds

The Regulation determines which investments the foreign investment conditions will apply to on the basis of three core parameters.

• Investment Value Threshold: Only investments exceeding 100 million euros will fall within scope. That is, this threshold targets investments of a size capable of potentially affecting the functioning of the Single Market.
• Global Capacity Threshold: The conditions will apply only where the foreign investor’s country holds more than 40% of global manufacturing capacity in the relevant sector. In practice, this criterion covers investments from countries in a dominant position particularly in battery, solar photovoltaic and electric vehicle production.
• Notification Threshold: Investments through which a foreign investor would acquire 30% or more of the shares, voting rights or control in an EU-based company must be notified in advance to the Investment Authority of the Member State concerned. Where several foreign investors act in concert, or where investments are made through affiliated entities or complex ownership structures, the relevant shareholdings must be aggregated.
   
  1. Sectors Covered

The Regulation identifies the strategic manufacturing sectors to which the foreign investment conditions will apply by way of a limited list. These are the battery technologies and battery energy storage systems value chain; electric, off-vehicle charging hybrid and fuel cell vehicles, together with electrification and digitalisation components; solar photovoltaic technologies; and sectors relating to the extraction, processing and recycling of critical raw materials. The common feature of these sectors is that they hold innovative potential, that they are areas where the EU is not yet at or near the global innovation frontier, and that securing sufficient Union capacity is deemed strategically essential.

On the other hand, investments from countries with which an economic partnership or free trade agreement with the EU is in force or provisionally applied -including the EU-based subsidiaries of those countries- are excluded from scope. Service investments and portfolio investments also fall outside the scope of these rules.

1. The Six Value-Added Conditions

The conditionality framework that lies at the heart of the new foreign investment architecture will become binding in all Member States one year after the Regulation enters into force. Under this new mechanism, the Investment Authorities will be able to approve foreign direct investments brought before them only on condition that at least four of the following six strategic criteria are met.

• Capital and Ownership Limit: The foreign investor may not acquire a capital share, voting rights or equivalent control rights exceeding 49% in an EU-based company. This limit structurally guarantees that EU partners have an effective say in the management of the company, without preventing the entry of foreign capital into Europe.
• Joint Venture (JV) Requirement: The foreign investor will be required to carry out the investment through a joint venture with one or more EU entities and not to acquire a stake or control rights exceeding 49% in that joint venture. The joint venture must be structured so as to ensure the effective participation of EU partners in management, technology transfer and capacity-building processes. This condition seeks to ensure that the foreign investment is genuinely integrated into the European industrial ecosystem and that know-how remains within the borders of the Union.
• Intellectual Property and Licensing: The foreign investor must license the intellectual property rights and know-how necessary for carrying out the economic activity to an EU-based company, the joint venture or the legal entity acquiring the Union entity. The most striking element of this condition is the detailed safeguards regarding the protection of intellectual property. Intellectual property rights belonging to the EU-based company or the relevant legal entity prior to the investment will remain fully and exclusively in the ownership of that entity. The foreign investor may not make any claim over these rights or engage in any activity that would restrict their use. Intellectual property rights developed as a result of joint work after the investment will be jointly owned by the foreign investor and the EU-based company or joint venture. The terms of joint ownership will be clarified as far as possible before the investment is approved and will be notified to the Investment Authority.
• R&D and Innovation Commitment: The foreign investor must carry out, each year within the borders of the Union, R&D expenditure amounting to at least 1% of the EU-based company’s annual gross revenue. This ratio will be applied in proportion to the foreign investor’s controlling stake. Such investment may be directed to research institutions established in the EU, or may also be carried out in the form of direct or indirect financial support to specific R&D activities conducted within the EU-based company, the joint venture or the Union entity, to the training of EU workers, or to research projects within the Union.
• Mandatory Employment Quota: At least 50% of the workforce employed under the foreign direct investment will be required to consist of EU workers. This is the only mandatory one among the six conditions, and it must be met for an investment to be approved by the Investment Authority. The employment in question must also be supported by adequate training and capacity-building measures. Where an EU company or Union entity already carrying out manufacturing activity prior to the investment is acquired, priority will be given to retaining the existing workforce or re-employing the former workforce.
• Contribution to the Local Value Chain: The foreign investor will endeavour to source at least 30% of the inputs used for products placed on the EU market under the investment from the EU and will prepare and publish a strategy to this end. The use of the verb “endeavour” indicates that this condition entails a softer obligation than the others; however, the requirement to publish the strategy publicly renders the investor accountable for following through on this commitment.

In summary, at least four of the six conditions must be met, but the fifth condition (employment) is mandatory in all cases. In practice, therefore, the investor must necessarily satisfy the employment condition and meet at least three more of the remaining five conditions.

4. The Türkiye Dimension of the Industrial Accelerator Act

Owing to its Customs Union relationship, Türkiye stands out as one of the non-EU countries that benefit from the equivalent origin provisions of the Industrial Accelerator Act. However, while the Regulation’s legal architecture grants Turkish-origin components Union origin status, it does not consider vehicles assembled in Türkiye as “assembled within the Union”.

Pursuant to Articles 8 and 9 of the Industrial Accelerator Act proposal, thanks to the Türkiye-EU Customs Union established as a result of Association Council Decision No 1/95, Turkish-origin automotive parts, steel, aluminium and net-zero technology components will be able to be considered of Union origin (Made in EU) in calculating the origin thresholds in EU public procurement and support programmes.

In assessments made to the press by a Commission spokesperson on the matter, this was confirmed, with the spokesperson stating: “The proposal introduces certain safeguards and clarifications for Turkish businesses in Europe and for goods coming from Türkiye. If a Spanish, French or Belgian company that wins a public tender in the EU decides to source its goods and components from Türkiye, these will be included within the scope.” However, this positive development does not mean that Turkish companies will be able to participate directly in EU tenders. Indeed, the spokesperson underlined this by stating: “When a public tender is opened for the reconstruction of a school or hospital in France, Turkish companies will not be entitled to participate in that public tender; there are no guarantees that reciprocity will be applied in this area.”[3] The fundamental reason for this is that Türkiye currently holds only observer status in the WTO Agreement on Government Procurement and that the existing Türkiye-EU Customs Union does not cover public procurement. Given this explicit emphasis by the Commission on the lack of reciprocity, it is highly likely that the EU will bring issues such as access to the public procurement market and national treatment far more strongly to the fore on the Türkiye-EU economic agenda in the period ahead.

In addition to all this, the aforementioned Articles 8 and 9 provide only for third-country-origin content to be considered of Union origin; they contain no provision on extending any physical geographical condition to third countries. However, in Annex III of the proposal concerning automotive, the very first requirement in the relevant sector is the condition that the vehicle is assembled within the Union. That is, if the current text of the proposal is retained, electric or off-vehicle charging hybrid vehicles whose final assembly takes place in Türkiye will not be able to be included in public procurement or support programmes requiring Made in EU status, since they will not meet the condition of being “assembled within the Union”.

When the scale and structure of Türkiye’s automotive exports to the EU are taken into account, the critical importance of the “assembled within the Union” condition becomes even more apparent. With an annual production capacity of approximately 2 million vehicles, Türkiye is Europe’s fourth-largest automotive production base. In 2025, Türkiye produced 1.42 million vehicles, exported 1.06 million of them, and broke a historic record with 41.5 billion dollars in total automotive exports. 30.1 billion dollars of these exports went directly to EU Member States.[4]^,[5]

As can be seen in Table 1, Türkiye’s trade in finished vehicles with the EU rests on two opposing trends. While a trade deficit of approximately 6.3 billion dollars is recorded in passenger cars (HS 8703), there is a trade surplus of approximately 6 billion dollars in the commercial vehicle segment, comprising buses, midibuses and minibuses (HS 8702) and trucks, vans and light commercial vehicles (HS 8704). In other words, Türkiye is in a position of buying passenger cars from the EU while selling commercial vehicles to it. This is precisely the area where the Made in EU criterion will exert its main effect. Indeed, approximately 60% of new passenger car registrations in the EU, and up to 90% of light commercial vehicle registrations, consist of corporate buyers, while the bus, truck and van market is effectively corporate in its entirety. Consequently, the centre of gravity of the criterion is not the passenger segment -where the corporate share remains relatively low and where Türkiye already runs a deficit- but the commercial vehicle segment, where corporate demand effectively constitutes the entire market and where Türkiye runs a surplus.

Table 1: Distribution of Türkiye's Finished-Vehicle Trade with the EU by Vehicle Type (2025, million dollars)

Source: Compiled from Turkish Ministry of Trade data.

The practical consequences of this situation carry a direct risk of undermining Türkiye’s export strength in automotive. For example, when a municipality issues a tender for zero-emission buses for its public transport fleet, an electric bus assembled in Türkiye will effectively fall outside this public procurement, since it will not meet the “assembled within the Union” condition. Similarly, a business purchasing a light commercial vehicle through financial support will be unable to benefit from that support if it opts for a Turkish-origin vehicle. By contrast, the effect on passenger cars is expected to remain relatively limited. Indeed, the share of corporate purchases in this segment is markedly lower than in commercial vehicles, and Türkiye is already a net importer in this segment. Nevertheless, this observation should not be read as meaning that the passenger segment is entirely exempt from the criterion. Electric or off-vehicle charging hybrid passenger models produced in Türkiye and placed on the EU market that fall within the scope of the criterion will face the same pressure to the extent that they become the subject of public procurement and supported sales.

At this point, correctly defining the nature of the risk is of great importance. The commercial vehicle surplus of approximately 6 billion dollars set out above is not, as of today, under direct threat. Indeed, this surplus rests largely on internal combustion engine vehicles that are not subject to the origin condition. Table 2 confirms this numerically. In 2025, 83.3% of Türkiye’s exports of buses, midibuses and minibuses to the EU, and 79.1% of its exports of trucks, vans and light commercial vehicles, consisted of internal combustion engine vehicles. In passenger car exports, the hybrid share, reaching 44.2%, consists predominantly of conventional, non-off-vehicle-charging hybrid models and, as such, falls outside the scope of the origin condition. Consequently, the main effect of the Made in EU criterion for Türkiye emerges not in the form of an erosion of existing revenue, but in the form of a transition risk.

Table 2: Distribution of Türkiye's Motor Vehicle Exports to the EU by Powertrain Technology, (2025)

Source: Compiled from Turkish Ministry of Trade data.

The EU automotive market is electrifying rapidly. The CO² standards in force provide that, from 2035, new passenger cars and light commercial vehicles may be registered only if they are zero-emission, while the heavy-duty vehicle legislation provides that all new urban buses must become zero-emission as of the same date. Although the revision proposal submitted by the Commission in December 2025 transforms the 2035 target for passenger cars and light commercial vehicles into a 90% reduction obligation -thereby opening a conditional space for off-vehicle charging hybrids and range-extender vehicles- it does not change the fundamental direction whereby the centre of gravity of the market will shift towards zero-emission vehicles. What is more, even the revision proposal itself carries the Made in EU logic into the body of the CO² legislation, through the role granted to low-carbon steel produced in the Union in offsetting residual emissions and through the additional credits provided to small electric vehicles produced in the EU. When the gradual raising of zero-emission targets for corporate fleets is added to this, it becomes clear that, although the demand segment to which the origin condition applies is relatively limited today, it will expand over time towards the entire market. In other words, while Türkiye’s current commercial vehicle surplus is safe, the real threat concerns whether this surplus can be carried into the future; that is, whether the electric equivalent of the same demand can be produced in Türkiye and placed on the EU market.

The data in Table 2 also reveal that this transition has already begun in Türkiye’s export composition. While the share of electric vehicles in export value remains at only 1.7% in passenger cars, it reaches 11.6% in buses, midibuses and minibuses, and 14.6% in trucks, vans and light commercial vehicles. That is, Türkiye’s electric vehicle exports are concentrated precisely in the commercial vehicle segments targeted by the origin condition. Reaching approximately 1.2 billion dollars as of 2025, these electric commercial vehicle exports indicate the current magnitude of the export volume that would be unable to meet the origin threshold should the proposal be enacted in its current form. As long as zero-emission buses and light commercial vehicles assembled in Türkiye are unable to meet the origin threshold, Türkiye’s position in this segment will gradually turn into a competitive disadvantage as electrification advances. The pace of the transition has already reached a striking threshold in the bus segment. The share of zero-emission vehicles among new urban bus registrations in the EU rose from 12% in 2019 to 60% as of 2025.[6] In the bus segment specifically, the demand covered by the origin condition now represents not the future of the market but its present majority. This is precisely the source of the real seriousness of the risk.

Another critical dimension of the picture that the proposal creates for the Turkish automotive industry is that it envisages a two-tiered structure directed at different links of the automotive value chain. As discussed above, Articles 8 and 9 consider Turkish-origin automotive parts as of Union origin in calculating the origin thresholds thanks to the Customs Union, while Annex III requires the final vehicle to be assembled within the Union. This dual construction keeps Türkiye’s supplier industry within scope while leaving final vehicle production outside it. That is, the text of the proposal makes it attractive to use parts and components produced in Türkiye as inputs for vehicles assembled in the EU but does not allow a vehicle completed in Türkiye with those same components to meet the origin threshold. The likely reflection of this structure on rational producer behaviour may be the relocation of final assembly to the EU and the gradual steering of production capacity in Türkiye towards intermediate-goods supply. Undoubtedly, keeping components within scope will provide Türkiye’s supplier industry with a significant relative advantage over other third-country suppliers. However, given the added value, brand value and depth of employment that final vehicle exports carry, a shift in the export structure from the finished product towards intermediate goods cannot be assessed as a clear gain for Türkiye. Moreover, the actual scope of this advantage will depend on the product composition of the Turkish supplier industry. With electrification, the centre of gravity of the automotive value pool is shifting towards components such as batteries, electric motors and power electronics. By contrast, the existing accumulation of the Turkish supplier industry was largely shaped during the internal combustion technology era. Consequently, for the advantage offered by Articles 8 and 9 to retain its meaning in the electric vehicle age as well, it appears to depend not only on preserving the existing parts base but also on developing production capacity in components specific to electric vehicles.

When the asymmetric pressure that the origin condition directs at the commercial vehicle segment, the transition risk made apparent by accelerating electrification, and the two-tiered construction in the value chain are assessed together, it becomes clear that the proposal gives rise to four main areas of risk for the Turkish automotive industry. The first and most concrete of these is the erosion of the market position of existing exporters. This risk directly concerns producers that already export electric or hybrid buses, minibuses and light commercial vehicles to the EU. The risk is even more pronounced for producers that base their production planning largely on exports to the EU market. Indeed, the Made in EU criterion directly targets the corporate and publicly supported sales channels in which these producers are strongest. The inability of vehicles assembled in Türkiye to meet the origin threshold will lead to a gradual weakening of competitiveness in this segment. Two striking examples demonstrate that the risk is not merely a hypothetical scenario. Ford Otosan’s Kocaeli plants are the sole production centre in Europe of the Transit family -for years among the best-selling commercial vehicles in Europe and in Türkiye- and the world’s sole producer of the Transit Custom. The E-Transit Custom, the fully electric version of the Transit Custom, Europe’s best-selling one-tonne commercial vehicle, is also produced at Ford Otosan’s Yeniköy plant in Kocaeli.[7]^,[8] Similarly, the e-JEST and e-ATAK models produced by Karsan in Bursa have been market leaders in Europe’s electric minibus and electric midibus segments, respectively, for five consecutive years.[9] In other words, some of the European market’s leading products in the segments targeted by the origin condition are already produced in Türkiye.

The second risk, the diversion of new investment to the EU, concerns the investment decisions of the future rather than existing production. Benefiting from the public procurement and support mechanisms to which the origin threshold applies becomes a direct return on producing a vehicle “within the Union”. This will structurally make the EU advantageous in the choice of investment location, and this pull will apply not only to EU investors but also to third-country investors seeking to access the EU market. Consequently, a portion of the next-generation automotive investments that might otherwise be directed to Türkiye may shift directly to the EU in order to increase their profitability through support mechanisms.

The third and perhaps most structural risk is the possibility that foreign producers in Türkiye shift their production architectures in favour of the EU. This risk arises from the fact that automotive production in Türkiye depends largely on the production decisions of global brands. The production of electric and hybrid cars in Türkiye is still at the stage of becoming widespread. Although production exists, the process of expansion in terms of scale and model diversity has only just begun. However, when the EU market becomes far more advantageous for next-generation models for the reasons set out above, foreign producers in Türkiye may prefer to produce their new electric models in the EU. The facilities here, meanwhile, may remain confined largely to the production of previous-generation models based on internal combustion engine technology. This picture does not necessarily mean the closure of existing facilities. Nevertheless, in a period when the electrification process is advancing so rapidly, the facilities becoming stuck in the production of old-generation models could create a serious problem in terms of economic sustainability in the long run.

The fourth risk concerns the position of the domestic and national brand TOGG in the EU market. What is at issue here is not the complete blocking of TOGG’s sales in Europe. The risk will be concentrated in the supported and corporate sales channels rather than the individual consumer market. TOGG’s sales in Europe are limited at present, and given that the brand is relatively new, this is to be expected. However, when the brand’s product range expands and, in particular, models aimed at the corporate and public fleet segment are developed, the real competitive disadvantage may emerge precisely in these channels. Accordingly, the Made in EU criterion carries the potential to limit not today’s but the future’s market access for TOGG.

5. Conclusion

The Industrial Accelerator Act represents a historic turning point in the EU’s industrial policy. Indeed, this Regulation lays bare a deliberate and systematic break from the competition-first open market policy that has for decades constituted the cornerstone of the EU’s economic governance. Since the construction of the Single Market, the EU has defined industrial success as a natural output of fair competition, open trade and regulatory harmonisation, and has kept direct state intervention in the market limited as an exceptional instrument. The Industrial Accelerator Act reverses this equation. The steering of industry is now regarded as a structural precondition for protecting the Single Market and sustaining Europe’s competitiveness.

The main factor triggering this paradigm shift is that an increasingly protectionist global conjuncture has pulled the EU out of its rule-maker comfort and compelled it to pursue a reactive and interventionist industrial policy. In an environment where China’s public support for industry reaches 4-4.5% of GDP, where the United States provides substantial tax incentives under the Inflation Reduction Act, where the share of EU manufacturing industry in GDP has fallen from 17.4% to 14.3%, and where a significant proportion of European automotive suppliers plan to reduce their production capacity in the EU in the coming years, the cost of the “do nothing” option has steadily risen.

It should be underlined here, meanwhile, that the Industrial Accelerator Act has also brought serious controversies with it. Foremost among these controversies is the paradox of conflict with the rules-based international trade order that the EU itself built and has advocated for decades. The mandatory joint venture requirements, the 49% ownership ceiling, the intellectual property licensing conditions and the local employment requirements directly mirror the market access restrictions that the EU has for years opposed, particularly in China. The “assembled within the Union” condition that the Union applies to its own vehicles, meanwhile, is of the nature of a place-of-production requirement -a category distinct from component origin- and this exceeds the scope of the equivalent origin regime, carrying the potential to effectively exclude even allied countries’ vehicle exports from EU public procurement. The Regulation thus places the EU in a paradoxical position: while continuing to be one of the strongest advocates of the rules-based multilateral order, the EU is at the same time turning to instruments that push the boundaries of that order.

The second point of controversy arises in the compatibility of the requirements envisaged by the Regulation with existing supply chain realities. In an environment where more than 90% of solar photovoltaic modules are imported from China,[10] where Asian producers hold a dominant position in the battery cell value chain,[11] and where four-fifths of EU battery cell capacity is being built by Korean companies[12], it is not easy for the phased Union origin requirements to align with supply chain realities on the ground. The critical question here is whether the phased timeline envisaged by the Regulation can provide sufficient time for the restructuring of the supply chain.

The third point of controversy is the deep political divergence among Member States. The distance between France’s advocacy of strict intra-Union origin requirements and Germany’s support for a “Made with EU” approach[13] that also encompasses reliable partners constitutes the most decisive fault line in the Regulation’s legislative process. On the other hand, Spain’s and Italy’s steel sectors finding the origin definition “excessively weak”[14],[15] concretely demonstrates how the same text can be criticised from opposing directions by different Member States. This multidirectional political pressure shows that substantial changes in the legislative process are inevitable.

Despite all these points of tension, it is also impossible to overlook certain dimensions of the Industrial Accelerator Act. In particular, the digitalisation and simplification of permitting procedures stand out as structural reforms that directly target bureaucratic inertia, the chronic problem of European industry.

As a final word, this body of protectionist measures builds new barriers that are difficult to overcome for Türkiye, which is deeply integrated into the European value chain. While the non-updating of the Customs Union -which forms the basis of Türkiye’s trade integration with the EU- already constitutes a structural problem, next-generation policies such as the Industrial Accelerator Act render this situation far more complex and fragile. The fact that the Customs Union does not cover services, agriculture and, most importantly, public procurement legally limits Türkiye’s integration into the EU’s new state-supported industrial architecture.

The automotive sector in particular is the area where this complexity most concretely materialises. Turkish-origin components being considered of Union origin and included in the “Made in EU” quotas thanks to the Customs Union is a positive step for Türkiye’s strong supplier industry. However, the “assembled within the Union” geographical condition introduced for electric vehicles in the Regulation carries the potential to effectively exclude completed vehicles from public procurement, fleet incentives and CO² super credits where assembly takes place in Türkiye. For an automotive sector that directs 72.5% of its exports (30.1 billion dollars) directly to the EU market, this distinction is a threat that could draw not only existing production lines but also future foreign direct investment into the EU rather than Türkiye.

Resolving the question of updating the Customs Union -which has languished for years for political reasons- is of vital importance for Türkiye not to remain on the outer periphery in the face of this EU transformation and to be able to neutralise the growing risks. In the specific case of the Industrial Accelerator Act, following the submission of the legislative proposal, the trilogue stage between the European Parliament and the Council of the EU has been reached. Türkiye should assess this critical process, work closely with countries such as Germany that advocate cost control and supply chain integration, and conduct proactive lobbying for the adoption of a “Made with EU” approach instead of a strict “Made in EU” understanding. In particular, extending the “assembled within the Union” condition to cover Customs Union countries should be the most vital objective.