Lobbyists want the Commission to beef up rules protecting the domestic auto industry, but that may not help the car sector.
The EU should impose “minimum local content” rules to protect the industry from foreign competition, according to a demand from a coalition of some of Europe’s biggest automotive suppliers.
It’s a response to the growing troubles of the car industry, which has seen demand for electric vehicles slump while worries rise about a possible flood of Chinese cars into the EU and whether U.S. President Donald Trump will unleash a global tariff war.
In a letter to the European Commission, obtained by POLITICO, the group says the executive needs to create a regulation mirroring the one among the U.S., Canada and Mexico requiring 75 percent local production content in North America. The European letter doesn’t specify what percentage the group wants.
“It is time for Europe to take similar action and implement comparable regulations which require added-value content in Europe,” the letter says. “Without such a mechanism, we risk a major loss of value among automotive suppliers and equipment manufacturers, which would significantly weaken the whole sector.”
Under the post-Brexit trade agreement with the U.K., 45 percent of the components in cars entering the EU must be made in either the U.K. or the EU, or face a tariff of 10 percent.
Signatories include major suppliers from Italy and France, including Forvia, Adler and Valeo, along with French and Polish car supplier lobby groups.
“We urgently need to correct this situation, as the risks to employment are imminent,” said Valeo CEO Christophe Périllat. “There are solutions. We need to implement them very quickly.”
Separately, the IG Metall union, which represents most auto workers in Germany, proposed a similar scheme during a press conference in Frankfurt.
The letter comes as executives and lobby groups across Europe’s automotive value chain press lawmakers to take action to help the industry stave off competition from Chinese rivals eager to find new markets as they struggle with overcapacity at home.
Chinese competitors produce cheap, high-value EVs thanks to a robust supply chain and lower energy and labor costs.
But the letter isn’t backed by the whole industry.
“The auto industry depends on globally integrated supply chains and trade. Solutions to restore the level playing field should be assessed both on the degree of protection, as well as [on the] potential negative unintended consequences on supply chains and trade,” said Benjamin Krieger, secretary-general of CLEPA, the suppliers’ EU association, which did not sign.
Carmakers with large investments in China are worried about a backlash from Beijing; that concern is shared by many parts-makers with factories there.
Even if the Commission agrees, any action on setting local content rules is unlikely to rescue the industry. Batteries are the most valuable component of an EV and the bloc does not have its own champion, with carmakers instead relying on Chinese giants like CATL which are also developing factories in Europe.
Any local content rule would just be the latest effort by the EU to protect its car industry.
The Commission has already hit Chinese-made EVs with new duties ranging from 8 percent to 35 percent. Analysts, however, warn that Chinese carmakers have sufficiently low costs to still make a profit even after accounting for the duties — so the levies aren’t a panacea for European firms.
And suppliers say the new tariffs do little to protect them because they target the final vehicle, not components within the car.
“This industry faces the risk of massive delocalization” if no action is taken, Périllat said. “Tariffs only protect final assembly, but are inadequate to maintain the European industry.”
While EU-level discussions have primarily centered around automakers, their suppliers are becoming more vocal in Brussels to reverse policies they say hurt not just car brands but companies up and down the value chain.
The sector “is not limited to carmakers but involves a whole network of suppliers and indirect contributors responsible for 75 percent of the content value of vehicles,” the letter says.
The suppliers and others will bring their demands to the strategic dialogue on the future of the automotive industry that kicks off on Thursday and will be chaired by Commission President Ursula von der Leyen.