Everyone agrees Europe should build more of what it buys. The fight is over a smaller, sharper question: which countries outside the EU get to count as "Europe"? The answer will decide whether cars from Sunderland, Aichi, Ulsan, Bursa and Tangier are treated as partners or as competitors when European governments spend public money.
Status checked 28 October 2026 · Proposal stage — not yet law
TL;DR
- Three competing models are on the table: the Commission's automatic equivalence for FTA, customs-union and GPA partners; Parliament's opt-in list with strict conditions; and the Franco-German automotive compromise.
- Under the Franco-German deal of 16 October 2026, the UK (and reportedly Switzerland and EFTA states) could qualify if they align with EU investment screening and trade defence. Japan, South Korea and Türkiye would not.
- Morocco, home to large Renault and Stellantis plants, is also outside the compromise, despite its free trade agreement with the EU.
- Toyota is leading a "Made with Europe" campaign for trusted partners; Japan's government has asked for equal treatment.
- Where a carmaker's plants sit — inside or outside the EU — now matters more than where its headquarters is.
Key takeaways
- An FTA alone may not be enough: procurement equivalence depends on procurement commitments, and Parliament wants extra conditions.
- Korean and Japanese brands with EU factories are protected; their exports from Asia, Türkiye and Morocco are not.
- The UK's path shows the price of entry: alignment on China-related investment and trade policy.
- Parliament's committees vote on 1 December 2026; trilogues follow in 2027.
Why is the partner list the real battle?
The Industrial Accelerator Act (IAA), proposed on 4 March 2026, links public procurement and public support schemes in strategic sectors to EU-origin and low-carbon requirements. For vehicles, that means EU assembly, at least 70% EU-origin value in non-battery components and EU-made battery cells. Those thresholds are hard to meet — but they become much easier if components and vehicles from trusted neighbours count as EU origin. The partner list is therefore not a detail; it sets the effective size of Europe's industrial base.
The Commission's draft was generous on paper. In procurement it deems products from FTA partners, customs-union partners and parties to the WTO Government Procurement Agreement (GPA) to be of EU origin, where the EU has obligations to them. In support schemes it recognises FTA and customs-union partners. But the European Parliament's research service points out that the real list is shorter than it looks. Fewer than 30 EU trade agreements contain procurement chapters, and Executive Vice-President Stéphane Séjourné reportedly told industry that only about 20 countries would qualify. India, whose FTA with the EU was concluded on 27 January 2026 without procurement commitments, and which is not a GPA party, would be outside the procurement equivalence. Mercosur, whose agreement has applied provisionally since 1 May 2026 and includes a procurement chapter, is better placed.
What are the three competing models?
| Model | Who qualifies | Conditions | Backers |
|---|---|---|---|
| Commission proposal (Mar 2026) | FTA and customs-union partners; GPA parties for procurement | Automatic, but the Commission can exclude countries that deny EU firms national treatment or create security-of-supply risks | Commission; BusinessEurope favours a cautious, partner-friendly use of preference |
| Parliament rapporteurs (draft report) | Nobody automatically; countries added one by one by delegated act | De jure and de facto national treatment, consistency with EU economic security, equivalent competition conditions, core ILO conventions; FDI threshold lowered to €50m | Rapporteurs Cavazzini (Greens), Grudler (Renew), Jouvet (S&D); ETUC wants inclusion limited to EFTA, candidate countries and the UK |
| Franco-German compromise (16 Oct 2026, automotive) | EU plus the UK — and reportedly Switzerland and EFTA states — as trusted partners | Alignment with EU rules on foreign direct investment and trade defence, plus reciprocity | France and Germany; contested by ACEA, Toyota, Ford, Hyundai, Türkiye and Japan |
How did the UK get a door opened — and at what price?
For the UK, the stakes were existential for its car industry. The EU is the largest export market for British-built cars, and the UK was the EU's second-largest car export destination after the US in 2024. Several European manufacturers build in Britain, and supply chains run in both directions across the Channel.
France had resisted British inclusion, arguing that the point of the IAA was to strengthen production inside the EU and that admitting too many neighbours would dilute European preference. Germany, with deep supplier links to the UK, argued that Britain should not be grouped with distant trading partners. The 16 October compromise splits the difference. Britain can opt into the automotive framework, but only if it aligns with EU rules on foreign direct investment screening and trade defence — a clear reference to the measures the EU has taken against Chinese overcapacity.
The condition matters beyond cars. British metal suppliers have already been warned that zero tariffs under the UK–EU trade agreement do not guarantee a place in EU public procurement under the IAA. And Jaguar Land Rover has joined Toyota in warning that rigid production rules could raise costs and threaten jobs. Even for the UK, the door is open only on terms set in Brussels.
Why are Japan and South Korea outside?
On paper, both countries should be among the easiest to include. Japan has an Economic Partnership Agreement with the EU and is a GPA party; South Korea has had an FTA with the EU since 2011 and is also a GPA party. Under the Commission's text, their content would count as EU origin in both procurement and support schemes. The Franco-German compromise nevertheless leaves both outside the automotive framework.
Tokyo responded quickly. Chief Cabinet Secretary Minoru Kihara said the EU should treat products made in Japan on an equal footing with those made in the EU. Toyota went further on 16 October, launching a "Made with Europe" proposal. It wants the EU to recognise a limited number of trusted FTA and customs-union partners with full reciprocity — naming the UK, Türkiye and Japan — and argues that combining their production with the EU's would create a market and production scale of around 31 million vehicles. Toyota also said it could accept a 70% European-content requirement after a three-year transition. "Toyota is not a guest in Europe," said Yoshihiro Nakata, president and CEO of Toyota Motor Europe. Honda's European leadership has also argued for a cooperative approach based on shared values rather than strict local-production rules.
For Korea, the picture is more mixed. Hyundai and Kia already build in the EU — Hyundai in the Czech Republic and Kia in Slovakia — so their European-built models are not at risk. Korean media nevertheless warn that support eligibility for vehicles exported from Korea could change. And Hyundai's Turkish plant in İzmit, which exports most of its output to Europe, sits outside the compromise; Hyundai Europe's CEO Xavier Martinet has warned that excluding Türkiye could force the company to consider alternatives.
The logic of the compromise is that the IAA is primarily a shield against China, and that Japan and Korea, however friendly, are competitors in the same markets. Critics answer that excluding allies makes European vehicles more expensive and weakens the scale Europe needs to compete with Chinese manufacturers.
What does it mean for Morocco's car industry?
Morocco is the starkest case. In 15 years it has become Africa's largest car producer and a major exporter to Europe, built largely by Renault and Stellantis. In the first half of 2026 its automotive exports rose 17.4% to about MAD 93.65 billion, with a local integration rate of around 69% and more than 280,000 direct jobs, according to Moroccan business press. Stellantis is expanding its Kenitra complex towards an annual capacity of about 535,000 vehicles; Renault is preparing to build an all-electric Dacia Sandero in Tangier from 2027.
That electric Sandero is exactly the kind of car the IAA affects. Morocco has a free trade agreement with the EU, so under the Commission's text Moroccan content would count as EU origin in support schemes. Under the Franco-German compromise it would not. A Tangier-built electric Sandero could still be sold anywhere in Europe, but it might no longer qualify for purchase bonuses or social-leasing programmes — undermining the low price that makes the model work.
The two French carmakers are exposed differently. Stellantis says the large majority of its cars and vans sold in Europe are built inside the EU and that much of its Kenitra output serves Morocco, Africa and the Middle East. Renault is structurally more dependent on non-EU production for Europe, through Tangier and Bursa. ACEA, which represents both, has asked negotiators for a grandfather clause protecting existing investments outside the EU, while insisting that the debate should not be framed as excluding or targeting individual countries.
How does each partner country compare?
| Country | Relationship with the EU | Commission text | Franco-German compromise (cars) | Main exposure |
|---|---|---|---|---|
| United Kingdom | Trade and Cooperation Agreement; GPA | Inside | Conditional | Must align FDI screening and trade defence |
| Switzerland / EFTA | FTAs, EEA (Norway, Iceland, Liechtenstein); GPA | Inside | Conditional (reported) | Component suppliers, materials |
| Türkiye | Customs union since 1996; EU candidate | Inside (support schemes) | Outside | EVs, vans, buses, €14bn supplier exports |
| Morocco | Association agreement / FTA | Inside (support schemes) | Outside | Renault Tangier, Stellantis Kenitra EVs |
| Japan | Economic Partnership Agreement; GPA | Inside | Outside | Vehicles and parts exported from Japan |
| South Korea | FTA (2011); GPA | Inside | Outside | Exports from Korea; Hyundai İzmit |
| India | FTA concluded Jan 2026, no procurement chapter | Outside for procurement | Outside | Components, future EV exports |
What could the final list look like?
Outcome 1
Narrow club
EU plus UK, Switzerland and EFTA on conditions. Japan, Korea, Türkiye and Morocco outside, possibly with grandfathering for existing plants.
Closest to the Franco-German line.
Outcome 2
"Made with Europe"
A short list of trusted partners with full reciprocity — the Toyota model — possibly including Türkiye and Japan, after a transition period.
Needs support from Germany's industry and several smaller member states.
Outcome 3
Opt-in by delegated act
Parliament's model: the Commission adds countries over time if they meet national-treatment, security and labour conditions.
Creates a permanent negotiating lever for Brussels.
Outcome 4
Sector-specific lists
Different partner lists for vehicles, steel and net-zero technologies, reflecting different supply chains.
Complex, but closest to how the IAA is already structured.
What should companies in partner countries do now?
- Model your plant network under each list. Run the 70% vehicle calculation with partner content counted and not counted. The difference shows which plants and suppliers carry the risk.
- Separate legacy and new programmes. If grandfathering is adopted, existing investments may be protected while new models are not. Plan future electric programmes accordingly.
- Prepare an EU footprint option. Hyundai's Czech and Kia's Slovak plants show the value of EU-based capacity. Identify which models could move or which sub-assemblies could be localised.
- Work through government channels. Japan, Türkiye and the UK are negotiating politically; companies should feed them data on European value added, jobs and supplier links.
- Watch the conditions, not just the list. Alignment on investment screening and trade defence may become the price of entry for every partner — with consequences for relations with China.
Pro tip
If your company sells into EU subsidy programmes from outside the EU, track the battery rule as closely as the partner list. Even a partner-country vehicle will need EU-made cells to qualify, so battery sourcing may decide eligibility before geography does.
Risk to watch
A narrow list could split European car production into two tiers: plants inside the club that build subsidised EVs, and plants outside it that keep building cheaper combustion and hybrid cars. That would lock partner countries out of the growth segment just as Europe's electric transition accelerates — even as France and Germany push to soften the 2035 CO₂ target to a 90% cut.
Made in Europe Tracker
The partner-list fight
- 27 Jan 2026EU–India FTA concluded, no procurement chapter
- 4 Mar 2026Commission: FTA, customs-union and GPA partners count
- 1 May 2026EU–Mercosur provisionally applied, with procurement chapter
- 16 Oct 2026Franco-German deal: UK conditional; Japan, Korea, Türkiye out
- 16–19 Oct 2026Toyota's "Made with Europe"; Tokyo asks for equal footing
- 1 Dec 2026Parliament committee vote
- 2027Trilogues decide the final list
Frequently asked questions
Does a free trade agreement with the EU guarantee "Made in Europe" status?
Not necessarily. Under the Commission's proposal, FTA partners count in support schemes, but procurement equivalence depends on the agreement containing procurement commitments. Parliament wants additional conditions, and the Franco-German compromise would limit automotive equivalence to the UK and a few European neighbours.
Is the UK definitely included?
No. The Franco-German compromise opens a conditional path for the UK, subject to alignment with EU investment screening and trade-defence policy. It still has to survive negotiations between Parliament, Council and Commission.
Are Japanese and Korean cars built in the EU affected?
No. Origin follows where a vehicle is made. Toyota models assembled in EU plants, Hyundai's Czech-built cars and Kia's Slovak-built cars can qualify if they meet the content and battery rules. The exposure is for vehicles exported from Japan, Korea or third-country plants such as Türkiye.
What does the outcome mean for Morocco?
If Morocco is outside, Moroccan-built electric cars such as the planned electric Dacia Sandero could lose access to EU purchase incentives, though they could still be sold. ACEA is seeking a grandfather clause to protect existing investments.
Made in Europe Tracker · the series
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Sources
- EPRS — International dimension of the proposed IAA (Sep 2026)
- Bloomberg via Yahoo Finance — Germany, France push to scrap climate neutrality goal for cars (Oct 2026)
- Automotive World — Toyota calls for UK, Turkey and Japan in EU content rules (Oct 2026)
- Nippon.com / Jiji — Tokyo seeks fair treatment for Japanese vehicles (Oct 2026)
- Hürriyet Daily News — Toyota, Ford and Hyundai on Made in EU (Oct 2026)
- EcoActu — Morocco's car sector and the 70% rule (Oct 2026)
- Le360 — Made in Europe and Morocco–EU talks (2026)
- Euronews — UK car exports and the Made in Europe debate (Feb 2026)
This article explains a legislative proposal and negotiating positions that may change. It is not legal or investment advice.
Reviewed by the Kurums Industry desk · Startup › Industry › Automotive · Last checked 28 October 2026
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