As highlighted in a recent report by Clément Beaune, France’s High Commissioner for Strategy and Planning; “European industry facing the Chinese juggernaut”, Chinese products are entering European markets at prices that are 30% to 40% below local production. For European industry to endure, it must build a competitive ecosystem, a process that will inevitably take time. As long as this cost differential persists, protecting the domestic market remains an existential necessity. Without it, it will inevitably decline.
A scope detached from reality
The IAA’s primary weakness lies in its excessively narrow remit. While the report estimates that 55% of European industry is exposed to Chinese competition (rising to 70% in Germany), the IAA covers only 15% of the EU’s manufacturing base.
In the automotive sector—the backbone of the European economy—the scheme is confined to battery electric vehicles (BEVs) and plug-in hybrids (PHEVs), which together represent just one-third of the market. The remaining powertrains, still the main profit drivers for manufacturers and suppliers, face the same competitive pressures without any form of protection.
Even within this restricted scope, the IAA applies further filters, only targeting subsidised vehicles and corporate fleets. As a result, unsubsidised electric vehicles and consumer leasing models—despite representing a significant share of the market—are excluded.
Taken together, the conclusion is stark: even under the most generous interpretation (where tax incentives are treated as subsidies), only around 20% of the automotive market benefits from IAA measures, whereas most competing industrial nations have historically applied protection across their entire domestic markets.
The inconsistency of “Made with EU”
The IAA also introduces a vague and problematic concept: “Made with EU”. Under lobbying pressure, the original “Made in EU” local content requirement—limited to the 27 Member States—has been diluted to include, under certain conditions, countries with free trade agreements (such as Turkey, Morocco, India and Mercosur).
This expansion is fundamentally misguided. In the very segment the policy seeks to protect (the aforementioned 20%), the IAA effectively provides incentives to manufacturers to accelerate offshoring to lower-cost jurisdictions in order to remain competitive.
In its current form, the framework risks increasing Europe’s dependence on regions beyond its regulatory and industrial control. Rather than lifting industry to 20% of EU GDP (from 14% today), the IAA may paradoxically accelerate its relocation abroad by providing a legal framework for doing so.
The “floor price” trap
Finally, regulatory changes introduced in January 2026—illustrated by the Cupra case—have brought in a “floor price” mechanism for electric vehicles as an alternative to tariffs. Instead of encouraging reshoring, this measure risks hastening the shift of EV production to China, outside the IAA’s scope—directly undermining the sovereignty objectives championed by Brussels.
While the IAA contains sensible provisions to support local investment, its substance has been significantly diluted by lobbying. If Europe is to remain an industrial power, it must not be naive and adopt a more assertive stance. This requires broadening the scope of the IAA: one cannot counter a 40% price disadvantage by shielding only 20% of the automotive market and 15% of manufacturing.
It also demands a stricter definition of local content—limited to EU Member States—and the removal of the “floor price” clause, a Trojan horse that renders tariff protection largely ineffective.
The time for half-hearted measures has now gone: what is at stake is survival.
Stéphane Faure is Chairman of Astyrian Patrimoine.
