With today's draft of the Industrial Accelerator Act (IAA), the EU Commission is not providing the necessary answers to the major challenges facing European industry.

VDA President Hildegard Müller: "In its current form, the IAA will not be able to significantly strengthen the competitiveness of industry in Germany and Europe. Its industrial policy impact will unfortunately be extremely limited. Brussels still hasn't recognized that there is no alternative to comprehensive reforms to strengthen international competitiveness. The IAA, however, fails to do precisely that. Instead of focusing on international trade, open markets, less regulation, and improved business conditions, the Commission's proposal focuses on further requirements and regulations."

The focus is misplaced:
New partners and markets must be the real top priority

"To truly strengthen industry in Germany and Europe, a range of measures is needed. The competitiveness agenda must include completing the EU single market, concluding further free trade and raw materials agreements, technological openness, and drastically reduced regulation. In addition, measures to lower energy costs, further develop the Capital Markets Union, and facilitate financing for the transformation are essential. However, the IAA offers far too little in these areas. This is all the more incomprehensible given that the IAA explicitly aimed to strengthen industrial competitiveness, in addition to accelerating decarbonization and strengthening industrial resilience," the VDA President emphasized.

At the same time, Müller explained: "The provisions for simplifying and accelerating the approval process, as outlined in the IAA, are a good first step towards the urgently needed, comprehensive reduction of bureaucracy. This step towards deregulation must now be followed by further measures as a matter of urgency."

Comprehensive improvement of location attractiveness is not adequately addressed

The Commission's goal is for the manufacturing sector to account for at least 20% of the EU's gross value added by 2035. While this target is fundamentally sound, it has been missed repeatedly in the past. For many years, the manufacturing sector's gross value added has fallen far short of this mark – precisely because the location conditions are unsuitable. And with regard to the IAA, it is unfortunately true that the chosen measures are largely unsuitable for achieving this goal in the future.

"The local content requirements proposed in the draft cannot remedy the lack of competitiveness of the location and cannot replace an ambitious and decisive location policy. They can also provoke further trade policy conflicts and thus harm the export-oriented German economy and the German automotive industry. In addition, local content requirements can increase companies' production costs and thus reduce their competitiveness," Müller said.

Crucial now: properly support production location for E-cars

The IAA proposes granting so-called "super credits" only for small electric cars produced in Europe, which can be used within the framework of CO₂ fleet regulations. However, anyone who proclaims the strengthening of the European automotive industry should include all electric vehicles produced in Europe and not limit the regulation to specific vehicle sizes. Furthermore, unbureaucratic implementation must be guaranteed. "Additional complex verification and documentation requirements would counteract the goal of relieving companies in the EU of bureaucratic burdens. We need less bureaucracy, not more," Müller emphasized.

Open design of IAA with focus on materials is crucial for the automotive industry

The proposed mechanism for crediting CO₂-reducing measures in the automotive value chain should be rejected in its current form. Fulfillment of the requirements is not within the control of the automotive industry. The proposal's impracticality is further demonstrated by its sole focus on steel for crediting CO₂ reduction measures. This neglects other material flows in vehicle and component manufacturing and creates wrong incentives for decarbonization in the automotive industry.

A successful transformation requires capital

There is no doubt that foreign direct investment (FDI) drives innovation and transformation—open markets are key to technology exchange. And a successful transformation of European industry requires large amounts of capital, including from third countries. While the EU's efforts to strengthen its resilience, particularly in the context of FDI in the EU electric vehicle and battery sectors, are fundamentally sound, the IAA draft sets out very extensive requirements, including a joint venture obligation, in the aforementioned sectors. It is crucial, however, that these requirements do not trigger trade retaliatory measures or deter potential investors from third countries. Furthermore, it is essential to carefully examine the potential measures with regard to their impact on the competitiveness of European companies.