EU's 'Made in Europe' EV push: opportunity or burden for Korean battery makers?

The EU's push to enact an Industrial Acceleration Act aimed at boosting domestic production across the automotive and battery supply chain is expected to accelerate a broader realignment of the global auto industry. Analysts say the shift could open new opportunities for South Korean battery and materials companies as the EU moves to reduce its dependence on China.

According to a report released Wednesday by the Korea Automobile Research Institute titled "The Industrial Acceleration Act and the EU-ification of the Automotive Supply Chain," the European Commission adopted a draft of the act in March and is advancing it through the legislative process. The bill targets the automotive, energy-intensive and climate-neutral technology sectors, with the dual aim of strengthening domestic manufacturing competitiveness and accelerating decarbonization.

A defining feature of the IAA is the introduction of origin requirements for public procurement and state support of electric vehicles. To qualify for subsidies or public procurement benefits, EVs would need to be finally assembled within the EU, and key components, batteries and certain materials would have to meet EU-origin standards.

Once enacted, the legislation is expected to entrench a "Made in EU" policy across the entire EV supply chain. The report noted that the EU views the growing influence of Chinese companies in the European EV market as a problem. The market share of European-headquartered automakers in the EV segment has declined while Chinese manufacturers have consistently gained ground.

The EU also plans to tighten scrutiny of large-scale foreign direct investment. Companies seeking to invest would be required to demonstrate tangible value creation within the bloc — through job creation, research and development, technology transfer and expanded local sourcing. The intent is to encourage genuine production and technology hubs rather than simple assembly operations.

The legislation also envisions the designation of industrial acceleration zones. Each member state would be required to designate at least one such zone, with streamlined permitting procedures to support the expansion of production facilities for key industries including battery cells, cathode materials, electric powertrains and low-carbon steel.

The report assessed that Korean companies face both opportunities and challenges. As a country with a free trade agreement with the EU, South Korea is positioned to hold a relative advantage over Chinese rivals. As the EU works to reduce its reliance on China, domestic battery, materials and components firms could emerge as alternative suppliers or strategic partners.

However, tighter origin rules are expected to make expanded local production and supply chain investment unavoidable. The extent to which Korean companies benefit will depend on how broadly the final legislation defines and weights EU-origin status.

"Even if some key provisions are softened, the EU's policy direction of linking public procurement and state support to origin and low-carbon requirements is likely to remain intact," the report said.

It added that "given the high costs of energy, labor, raw materials and component sourcing in the EU, excessive domestic production requirements could drive up manufacturing costs and vehicle prices," and that "the real-world impact of the IAA will depend on how effectively cost reductions and capacity expansion in batteries, components and materials are pursued in parallel."