‘Made in EU’ rules pose challenge for European truck manufacturers

Proposed European local content requirements could prove particularly challenging for truck manufacturers, with around half of medium and heavy trucks produced in Europe currently unable to meet proposed battery localisation rules, according to a new study commissioned by the European Automobile Manufacturers’ Association (ACEA).

The research, carried out by Ricardo, examines the implications of “made in the EU” requirements proposed under the Industrial Accelerator Act (IAA), which is intended to strengthen European manufacturing capacity and reduce strategic dependencies.

The proposed rules would introduce local content requirements for access to public funding and incentives, including public procurement, purchase subsidies and tax benefits for battery-electric, fuel-cell and plug-in hybrid vehicles.

Battery sourcing emerged as one of the biggest challenges for the heavy-duty vehicle sector.

According to the study, if the IAA requirements were applied today, around half of medium and heavy trucks manufactured in Europe would fail to meet the proposed local content requirements for European-made battery cells.

The challenge could become more significant as additional localisation requirements are introduced.

Fewer than 5% of battery cells used in EU-manufactured trucks are expected to contain EU or UK cathode active material by 2027, the research found.

While opportunities to diversify supplies of lithium iron phosphate (LFP) batteries away from China are increasing, Ricardo expects alternative capacity to remain limited and subject to substantial competing demand.

The study therefore concludes that European heavy-duty vehicle manufacturers are unlikely to be able to meet proposed requirements for Union-origin cathode active materials that would take effect three years after the IAA enters into force.

Battery sourcing constraints could also affect trade between the EU and UK.

Ricardo found that difficulties obtaining European-made batteries could prevent manufacturers from meeting battery rules of origin under the EU–UK Trade and Cooperation Agreement (TCA), potentially leaving a significant proportion of EU-manufactured trucks exposed to tariffs when exported to the UK.

ACEA estimates the resulting industry-wide tariff cost could approach €1.5 billion.

The research also examined the European content of other components. It found there is currently insufficient information to determine the proportion of European-produced green steel and low-carbon aluminium used by manufacturers.

More than half of the main electronic components used in European trucks are currently sourced from Europe, according to available evidence, compared with less than half of e-powertrain components. The European share is expected to decline in both categories.

Following the findings, ACEA has called for the battery localisation timetable under the IAA to be adapted to the specific circumstances of the heavy-duty vehicle sector.

The association said mandatory requirements to source European battery components should only take effect once an assessment demonstrates that suitable components are available in sufficient quantities within the EU. Based on current projections, ACEA said adequate supply is unlikely to be available before 2035.

ACEA has also called for a temporary change to battery rules of origin under the EU–UK TCA, arguing that this could avoid the estimated €1.5 billion tariff cost and enable manufacturers to direct more investment towards the transition to zero-emission vehicles.