Everything old is new again, this time with local content rules reportedly returning to protect a car manufacturing industry.
As reported by the Financial Times, the European Commission wants EV makers to have at least 70 per cent of their car’s content come from the European Union, at which point their vehicles will qualify for consumer-side subsidies.
According to the report, the draft legislation will require the 70 per cent local content figure to be based on the price of the vehicle’s components, excluding the high-voltage battery pack, though parts for this too will need to come from Europe.
The European Commission will introduce these requirements to better protect the wider automotive industry – extending to suppliers – from competition from China.
It’s worth noting Chinese EVs are already subject to tariffs in Europe, with the percentage defined by how much the EU deems a brand is being subsidised by the Chinese government.
A number of Chinese carmakers have recently been expressing interest or announcing plans to build vehicles in Europe to circumvent these tariffs, however it appears the latest local content rules add another step towards requiring as much European input as possible.
It’s not the first time a region has imposed local content rules, with even Australia doing so in the past.
In 1965, Australia imposed a requirement of 95 per cent local content in order for carmakers to avoid being hit by tariffs. This was later wound back to 85 per cent, and resulted in odd combinations such as the Toyota Corona being powered by Holden’s four-cylinder Starfire engine.
Australia later ditched local content rules entirely, and instead implemented the Button Plan which encouraged badge engineering – something which is also not uncommon in the car world today.
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