Mercedes-Benz chief Ola Källenius has warned that excluding Britain from the EU’s planned “Made in Europe” rules would be a self-inflicted wound for a car industry whose factories and suppliers still operate across the Channel as one production system. The warning lands as Brussels develops the Industrial Accelerator Act, a draft effort to shelter European manufacturing from cheaper foreign competition, particularly in strategic clean technologies. Its proposed “Made in EU” provisions would cover electric vehicles and components in public procurement and incentive schemes.
For a sector assembling cars from parts that can cross the Channel several times, the line between industrial policy and trade barrier is perilously thin.
“We would hurt our industry in the UK and the EU. That would be a deliberate choice to worsen the competitiveness of your own industry,” Källenius said. Källenius speaks both as Mercedes-Benz chief executive and president of the European Automobile Manufacturers’ Association, ACEA.
His intervention reflects a wider industry campaign: Stellantis and Renault have backed British inclusion in the rules, while ACEA and the European automotive suppliers’ association Clepa have also urged negotiators not to sever UK-based capacity from the European definition of industrial resilience. Their argument is not that Europe should abandon efforts to build its own battery, vehicle and component base. It is that the policy’s geography risks becoming more important than the supply chain it is meant to strengthen.
British factories and suppliers may now sit outside the EU’s legal borders, but they remain woven into continental production networks, including those serving German and French carmakers.
A protection plan meets an integrated industry The
Commission’s proposal would apply “Made in EU” preferences to EVs and their components through public intervention, while holding out equal treatment for countries that provide EU firms comparable market access under trade agreements. That leaves room for negotiation, but it also gives Britain an uncertain place in a policy built around the EU-27. For manufacturers, uncertainty alone carries a cost.
Companies deciding where to source components, place production or invest in capacity need to know whether a British-made part will count towards eligibility for a subsidised or publicly procured European vehicle. A rule that treats UK content as an external input could push firms to duplicate supply chains, redesign sourcing arrangements or favour suppliers inside the bloc even where the existing network is cheaper and more efficient. The political logic behind the act is clear enough.
European policymakers face pressure to defend domestic manufacturers against Chinese industrial scale and low-cost imports. But the car industry’s complaint is that a measure designed to reduce dependence on distant supply chains could instead penalise the nearest one. That tension has begun to reshape the politics around the bill.
France, previously resistant to British inclusion, has reportedly moved towards a joint Franco-German position that would allow the UK into the automotive scope of “Made in Europe” — subject to conditions. The reported bargain includes reciprocity and British alignment with the EU’s stance on tariffs for Chinese electric vehicles. That is an important shift, but not a settlement.
It turns UK participation from a simple question of supply-chain reality into a wider negotiation over trade policy. Britain could be treated as European for cars only if it adopts parts of the EU’s external economic strategy. For Brussels, that may look like leverage.
For carmakers, it risks holding investment planning hostage to a dispute far removed from the factory floor.
Tariff pressure is approaching
The industry is fighting a second battle at the same time. ACEA has called for the urgent suspension of planned 10% tariffs on electric vehicles traded between the EU and UK under post-Brexit rules of origin. Without a change, vehicles exported in either direction would face the duty from 2027.
The tariffs were intended to encourage local battery production by requiring sufficient regional content. Yet the industry says battery supply constraints have made compliance difficult. The result is a collision between policy ambitions: Europe and Britain want more local EV manufacturing, but the transition still depends on supply chains that have not been fully rebuilt within either market.
A 10% tariff is not a technical inconvenience. It can erase already narrow margins on mass-market electric cars, raise prices for buyers or redirect production and model allocation. Combined with a restrictive interpretation of “Made in Europe”, it could leave companies facing both a penalty at the border and a disadvantage in access to incentives or procurement.
The Commission’s draft is not yet a finished law, and the emerging Franco-German opening suggests that national governments recognise the risk. But the episode exposes the harder question beneath the rhetoric of industrial sovereignty: whether Europe’s response to Chinese competition will reinforce its manufacturing base, or fragment one of the few regional industrial networks it already has.