Mercedes-Benz chief executive Ola Källenius has warned that excluding British manufacturers from European industrial preference rules would damage automotive production on both sides of the Channel, increasing pressure on Brussels ahead of negotiations over its proposed Industrial Accelerator Act.

The head of Mercedes-Benz has warned that excluding British manufacturers from the European Union’s proposed industrial preference rules would damage the competitiveness of carmakers across Europe, challenging Brussels over legislation intended to protect European production from growing international competition.

Ola Källenius, chief executive of Mercedes-Benz and president of the European Automobile Manufacturers’ Association (ACEA), criticised the prospect of restricting British participation in the forthcoming “Made in Europe” framework during discussions in Brussels on Wednesday, 14 October.

His intervention comes as European governments negotiate the Industrial Accelerator Act, which would introduce European-content requirements affecting public procurement and certain forms of industrial support.

The proposed legislation is intended to strengthen manufacturing within the EU, but its treatment of production in neighbouring countries has become contentious, particularly in an automotive industry whose factories and suppliers operate across national borders.

European production extends beyond the EU

British manufacturing remains closely integrated with continental European automotive production despite the United Kingdom’s departure from the single market.

Components manufactured in Britain are incorporated into vehicles assembled in EU member states, while British factories depend on engines, batteries, electronics and other parts produced in continental Europe.

The value of this integrated manufacturing system depends on companies being able to source components across borders without unnecessary restrictions.

Källenius warned that excluding the UK from the proposed rules would weaken manufacturers operating on both sides of the Channel.

His position reflects industry concerns that a narrowly defined European-content regime could impose additional costs on companies already facing pressure from Chinese competition, slowing demand and substantial investment requirements.

As EU Today reported in September, British Prime Minister Andy Burnham has been pressing Brussels to recognise the UK as a trusted industrial partner under the emerging framework.

Germany has also supported a broader approach that would allow selected trading partners to qualify under European-content rules where reciprocal conditions are met.

France has favoured stronger preferences for production within the EU itself, reflecting differences among member states over how far European industrial policy should extend beyond the Union’s borders.

A dispute over industrial sovereignty

The Industrial Accelerator Act proposed by the European Commission is intended to strengthen Europe’s manufacturing base and support production in strategically important sectors.

Its provisions address public procurement and industrial incentives affecting products including vehicles, steel, aluminium and clean technologies.

The Commission wants European public spending to support local industrial capacity rather than reinforce dependence on imports from major international competitors.

China has become the principal focus of those concerns because of its expanding manufacturing capacity, particularly in electric vehicles and batteries.

However, measures designed to counter Chinese industrial competition could also affect established trading partners whose manufacturers form part of European supply chains.

The United Kingdom, Norway, Switzerland and Turkey occupy different legal positions in their economic relations with the EU, but all maintain important industrial connections with member states.

An approach that treats their production as equivalent to imports from countries with substantially different market conditions could require European companies to reorganise existing supplier relationships.

For manufacturers, replacing a supplier may involve more than simply ordering components from another factory. Production standards, technical certification, logistics and long-term investment arrangements can make changes expensive and difficult.

Industry demands regulatory certainty

Following an ACEA board meeting on Wednesday, European manufacturers called for faster progress on the wider automotive legislative package.

In its 14 October statement, ACEA urged EU institutions to advance negotiations so that the package could be finalised early next year.

The association argues that manufacturers require a predictable regulatory framework to plan investments in electric vehicles, production facilities and new technologies.

Källenius linked the industry’s transition towards zero-emission mobility with the need to preserve employment and strengthen economic security.

European manufacturers are simultaneously investing heavily in electrification while competing against Chinese companies with established battery supply chains and significant production capacity.

The resulting financial pressures are particularly serious for manufacturers that must develop new vehicle platforms while maintaining existing factories and dealer networks.

Additional restrictions on component sourcing could complicate those decisions at a time when companies are seeking to reduce costs.

Britain refuses to follow EU tariffs automatically

The dispute has acquired a further dimension following remarks by British Business Secretary Jonathan Reynolds.

Speaking on Wednesday, Reynolds indicated that Britain would not automatically follow the European Union in imposing tariffs on Chinese vehicles.

The UK government maintains that trade measures must be determined according to British economic interests rather than adopted simply to align with Brussels.

That position complicates London’s attempt to secure favourable treatment under European industrial rules.

EU policymakers have argued that closer alignment on trade defences could support Britain’s claim to be treated as a trusted partner.

British ministers, however, must consider whether restrictions on Chinese imports would benefit domestic manufacturers and consumers.

The disagreement will form part of the broader economic relationship being discussed ahead of the next UK–EU summit, scheduled for 20 November.

The wider implications for EU–UK relations

The automotive dispute follows earlier negotiations over British participation in European defence procurement and other industrial programmes.

In both cases, London wants access to initiatives designed to strengthen European production while remaining outside the EU’s institutional framework.

Brussels must determine how far preferential treatment can extend to non-member countries without undermining the objectives of its industrial policy.

The Commission’s proposals have already revealed disagreements between governments favouring a tightly defined European manufacturing base and those seeking to preserve wider commercial partnerships.

Källenius’s intervention strengthens the argument that industrial protection cannot be considered separately from the supply chains on which European manufacturers depend.

The final legislation will influence investment decisions, procurement arrangements and the position of British suppliers within the continental automotive industry.

The outcome will also provide an indication of how far the EU is prepared to accommodate its closest trading partners as it attempts to strengthen European manufacturing against growing competition from China.

France and Germany are at odds over how the European Union should define European production under its emerging industrial preference rules, with Paris favouring a narrow EU-only system while Berlin wants trusted trade partners including Britain, Canada and Japan to remain eligible.

France and Germany have reopened a fundamental dispute over the European Union’s “Made in Europe” industrial policy, this time over the question that will determine how far-reaching the programme eventually becomes: which countries should qualify as European suppliers.

The disagreement centres on the Industrial Accelerator Act, under which the EU wants to use subsidies and public procurement to strengthen domestic manufacturing and reduce dependence on Chinese production in strategic sectors.

France is pressing for a restrictive definition centred on manufacturing within the EU’s 27 member states. Germany favours a broader approach that could extend preferential treatment to countries with close trade agreements or reciprocal industrial relationships with the Union.

That could bring Britain, Canada, Japan and potentially Turkey within the system rather than treating their products in the same way as goods from China and other outside suppliers, according to reporting on the Franco-German dispute.

The dispute has important consequences because “Made in Europe” is intended to influence how large amounts of public money are spent.

The Industrial Accelerator Act is designed to introduce European-content requirements into selected subsidy schemes and public contracts in sectors including electric vehicles, batteries and clean technology. The underlying objective is to ensure that European public spending supports European industrial capacity rather than increasing dependence on imported technologies.

EU Today has followed the argument since the proposals began taking shape. In February, it reported that the Commission was preparing local-content rules for strategic technologies. The debate has since moved from whether such preferences should exist to how broadly “European” should be interpreted.

Paris wants the benefits concentrated inside the EU. The French position reflects concern that allowing manufacturers in countries with EU trade agreements to qualify could dilute the purpose of the scheme. If access is too broad, the argument runs, public procurement may do little to increase production or employment within the Union itself.

Germany is more cautious about creating a closed EU system. Its manufacturing economy is embedded in supply chains extending across Europe and into neighbouring markets, including Britain and Turkey. Berlin has therefore argued for a “made with EU” approach under which trusted trade partners could participate if their markets also provide reciprocal access to European industry.

That disagreement has become increasingly important for Britain. British manufacturers, particularly in the automotive sector, remain closely integrated into continental production networks despite Brexit.

A strict EU27 definition could therefore produce situations in which components made in Britain count as foreign content even when they are incorporated into vehicles assembled inside the Union.

France and Germany had appeared to be moving towards a broader industrial compromise last week. Their negotiations combined the “Made in Europe” question with disagreements over vehicle-emission rules and the future treatment of combustion-engine technology. The latest discussions show that one of the hardest questions remains unresolved.

There is also concern among some EU governments that an overly broad system could create routes for companies from countries such as China to obtain favourable treatment indirectly.

The argument mirrors a wider change in EU economic policy. Supply disruptions, Russia’s war against Ukraine and China’s dominance of several strategic manufacturing sectors have pushed Brussels towards a more interventionist approach.

France sees public purchasing power as an instrument for rebuilding production specifically within the Union. Germany is seeking greater flexibility for supply chains involving trusted partners and appears more concerned about the trade consequences of drawing the boundary too tightly.

For Brussels, the problem is now practical rather than theoretical. The narrower the definition, the more industrial support remains inside the EU; the broader it becomes, the easier it is to preserve existing supply chains and relations with allies.

France and Germany are moving towards a possible compromise over the future of Europe’s automotive industry, linking negotiations over EU vehicle-emission rules with a separate dispute over how strongly European-made products should be favoured in subsidies and public procurement.

The negotiations bring together two issues that have divided Paris and Berlin: Germany’s demand for greater flexibility in rules governing combustion-engine vehicles and France’s campaign for stronger “Made in Europe” requirements in EU industrial policy.

Officials involved in the discussions believe a broader Franco-German agreement may now be possible, although differences remain over how European content should be defined and whether products made in countries with EU free-trade agreements should receive similar treatment.

The automotive dispute follows the Commission’s decision in December 2025 to propose significant changes to rules that had originally required a 100 per cent reduction in tailpipe CO₂ emissions from new cars from 2035.

Under the revised automotive package, manufacturers would instead face a 90 per cent tailpipe-emissions reduction requirement from 2035.

The remaining 10 per cent could be compensated through mechanisms linked to low-carbon steel produced in the EU and the use of e-fuels and biofuels.

EU Today reported before the Commission presented the package that pressure from Germany, Italy and European manufacturers was forcing Brussels to reconsider the original 2035 framework.

The subsequent proposal confirmed the shift.

In March, EU Today also examined the Commission’s decision to link low-carbon European steel directly to vehicle-emissions compliance, creating a connection between automotive climate rules and support for Europe’s heavy industry.

Germany has continued to argue for a technology-neutral approach.

Berlin wants legislation to leave scope for combustion engines operating on renewable or low-carbon fuels rather than treating battery-electric vehicles as the only route towards lower emissions.

That position is particularly important for Germany because of the scale of its automotive sector and the large industrial supply chain built around combustion-engine technology.

France’s priority is different.

Paris wants EU industrial policy to ensure that public subsidies and procurement increasingly support products manufactured inside Europe.

The argument centres on the Commission’s Industrial Accelerator Act, proposed in March as part of a wider strategy to strengthen European manufacturing.

The legislation introduces “Made in EU” and low-carbon requirements for public procurement and public support schemes covering strategic sectors including automotive manufacturing, steel, cement and aluminium.

The dispute is over what “European” should mean.

France favours a relatively strict definition focused principally on production inside the EU’s 27 member states.

Germany has advocated what Economy Minister Katherina Reiche has described as a “Made with Europe” approach, under which some products from close trading partners could qualify if those countries provide equivalent market access to European companies.

That could potentially include states such as Norway and Switzerland and partners including Canada.

Spain has been among countries seeking a middle position between the French and German approaches.

The issue matters because modern automotive supply chains do not stop at the EU’s external border.

Battery materials, semiconductors, electric motors and other components can pass through several countries before final assembly, while Britain and Turkey remain deeply integrated into European vehicle production.

The EU-UK relationship is particularly sensitive because stricter rules of origin for electric vehicles are due to apply from 2027.

EU Today previously reported that European and British manufacturers were seeking another delay to those rules because the regional battery supply chain had not developed as quickly as originally expected.

At the same time, the EU is attempting to reduce dependence on Chinese electric vehicles, batteries and critical inputs.

The Commission has committed €1.8 billion to a Battery Booster strategy intended to strengthen the European battery value chain.

European electric-vehicle demand is continuing to grow. A 16-market European survey examined by EU Today showed battery-electric cars taking more than a quarter of new registrations in July, although large differences remain between national markets.

Manufacturers must therefore make investment decisions while several important elements of the regulatory framework remain under negotiation.

Factory conversion, battery plants and new vehicle platforms require investments planned years in advance. The conditions applying after 2030 will directly affect where those investments are made.

A Franco-German understanding would not determine the final EU rules. The European Parliament, Commission and other member states remain part of both legislative negotiations.

It could, however, bridge two of the most important disputes: Germany’s demand for greater technological flexibility in the 2035 vehicle regime and France’s demand that public money be used more directly to support European production.

The negotiations now underway suggest Paris and Berlin are increasingly treating those questions as parts of the same industrial bargain.