Conditioning public support and foreign investment in the European automotive sector to local content or technology uptake: legal framework and strategic toolbox

This publication sets out recommendations based on a legal analysis as to how the EU and its Member States can condition (i) inbound foreign direct investments (“FDIs”) in the automotive sector, as well as (ii) the granting of European public support measures, to criteria that foster value creation within the EU, technology uptake, and environmental sustainability. This study comes as a response to the new threats and needs of the European automotive industry documented in a previous IMT publication Europe-China between Competition and Collaboration. 

The five recommendations are:

1. Establish a harmonised and mandatory FDI screening regime specific for the Automotive sector in the Industrial Accelerator Act (IAA) with precise screening criteria related to specific industrial or strategic stakes (as opposed to a cross-sectoral FDI screening mechanism)
2. Channel production aid through EU funds to avoid fragmentation and market distortions (European Competitiveness Fund)
3. Make EU preference and EU content criteria (open under conditions to products from EU strategic partners) binding for public support
4. Develop a dedicated “Made in EU” product-origin instrument as a basis for EU preference support policies in the automotive sector and for access to EU lead markets
5. Open the FDI Screening and local content tools to strategic EU partnerships with international partners

The proposed framework aims to (i) enable and give value to collaboration with partner countries, (ii) protect Europe’s automotive industry and jobs and (iii) ensure that European actors will be in a position to climb a learning curve and produce strategic technologies of the transition.