The Euro-IRA: Is France’s 75% Local Content Rule the End of Global EV Imports?

The Analyst’s Edge: The Free-Trade Illusion Shatters

For years, the European Union has stood as the global paragon of free trade, often viewing U.S. and Chinese industrial policies—like Washington’s Inflation Reduction Act (IRA) and Beijing’s ‘Made in China 2025’—with a mixture of skepticism and disdain. But as the tide of cheap, high-quality Chinese electric vehicles (EVs) washes over the continent, the EU’s defensive posture is collapsing. The new reality is a dramatic, protectionist pivot led by Paris.

As an Auto Market Insight Analyst based in China, with eyes firmly fixed on Western regulatory shifts, I can report that the gloves are officially off. France is demanding the EU implement a massive regulatory change: a 75% local content requirement for EVs sold within the bloc. This isn’t just a political squabble; it’s an existential crisis for global automakers and a radical reshaping of the European automotive supply chain.

The New Fortress: France’s Aggressive Pivot to ‘Made in EU’

The proposal, pushed by the French Finance Ministry and the Ministries of Ecological Transition and Economy, is a direct call for a ‘European Preference’ policy.

• The 75% Content Mandate: France is calling for EVs sold in the EU to be assembled in the region and to contain 75% locally sourced components, a localization level consistent with current internal combustion engine (ICE) vehicles. [Source Data]
• The ‘EU IRA’ Framework: This measure is explicitly modeled after the US IRA. The goal is to reform EV subsidy criteria—France’s existing €5,000 ‘car bonus’—to exclude vehicles with a high production/transport carbon footprint, effectively penalizing Chinese and Asian imports (including popular models like the MG4 and Tesla Model 3s imported from China).
• The Regulatory Lever: Paris is leveraging the mandated review of the controversial 2035 CO2 emissions regulations—the law that practically bans new ICE sales—to push this local content requirement through. France and Spain’s support for the 2035 goal is now contingent on the EU adopting these ‘European manufacturing’ incentives.

The motive is clear: prevent ‘massive’ job losses and counter the severe price competition from China, which currently benefits from lower production and battery supply chain costs. [cite: 6, Source Data]

EU’s Internal Auto-War: Germany vs. France

The push for ‘European Preference’ has cracked the foundation of the EU’s auto policy, setting Paris and Berlin on a collision course.

The French Rationale: Protectionism for Jobs

The French government’s stance is born out of industrial panic. Major manufacturers like Stellantis (which owns Peugeot and Citroën) have temporarily shut down multiple European plants due to weak EV demand and fierce competition, putting an estimated 350,000 automotive jobs in France at risk. France views the 75% rule as necessary ‘moderate’ protection to safeguard the entire European industrial value chain, particularly the vulnerable component suppliers competing with Chinese firms. [cite: 3, Source Data]

The German/Italian Stance: Flexibility and Fear of Retaliation

In sharp contrast, the German and Italian governments are heavily lobbying the EU to relax the 2035 combustion engine ban entirely. German Chancellor Friedrich Merz has pushed for the continued sale of plug-in hybrids, range-extender EVs, and even ‘highly efficient’ traditional ICE vehicles beyond the deadline. [Source Data]

This division stems from the differing market exposures of their national champions:

• The German Dilemma: Volkswagen (VW), Mercedes, and BMW generate immense profits from their Chinese operations. They fear that aggressive EU protectionist policies—such as the French-proposed content rules or increased tariffs—will trigger immediate, devastating retaliation from Beijing against their most profitable foreign market.
• The Manufacturing Split: Automakers like VW, Stellantis, and Mercedes, which predominantly produce for the EU market within Europe, are generally more open to local content rules. However, companies like BMW (with EU-market vehicles sourced from the US and China) and Renault (sourcing from Morocco) are understandably ‘hitting the brakes’ on the proposal.

Analyst’s Data Dive: Global Supply Chain Shockwaves

The 75% rule, if enacted, would not just affect Chinese imports. It fundamentally changes the calculus for all non-European automakers:

• US, Japanese, and Korean OEMs: Importers like Toyota, Hyundai, and Kia, who have significant manufacturing footprints outside the EU, would need to rapidly restructure their battery and electronic component supply chains to meet the threshold or risk losing critical consumer incentives and potentially facing compliance penalties in CO2 fleet legislation.
• The Battery Battleground: The EU Commission’s parallel ‘Automotive Industrial Action Plan’ already targets local content requirements for battery cells and components, recognizing that batteries account for 30-40% of an EV’s value. The French 75% vehicle-level rule simply amplifies this pressure, demanding massive, accelerated investment in European gigafactories.
• The Regulatory Uncertainty: The December 10 EU Commission meeting, where a comprehensive auto package and the ‘Industrial Accelerator Act’ were expected to be finalized, may be postponed due to the ongoing policy deadlock. The instability alone is forcing global investment decisions to pause. [Source Data, cite: 3]

The era of the EU as a truly open auto market is ending. It is now prioritizing industrial sovereignty over free-market purity, creating a complex, high-barrier environment that is the new normal for global players.

Recommended Reading

To understand the high-stakes global shift from integrated markets to national industrial strategies, I recommend: Daniel Yergin’s The New Map: Energy, Climate, and the Clash of Nations. It is an essential read on how the energy transition—the core driver of the EV shift—is fundamentally redrawing geopolitical and trade boundaries, providing context for the EU’s sudden turn toward protectionism.

Conclusion: The New Era of ‘Sovereign-Trade’

The French-led demand for a 75% local content rule for EVs is more than a bargaining chip—it’s a declaration that Europe is willing to sacrifice its free-trade principles to secure its industrial base. The irony is sharp: the EU is adopting the very industrial policy tools it once criticized, essentially building a moat around ‘Fortress Europe.’ This maneuver creates deep, immediate market friction for non-European automakers and a severe political schism between Germany and France. For any global OEM, the message is stark: if you want to sell in Europe, you must build your value chain in Europe, and you must do it now.

Disclaimer: The insights provided are based on current market data and regulatory proposals. All investment and business decisions should be made with consultation from qualified professionals.

For deeper analysis on EU regulatory changes, consult the Mobility Portal Europe.