EVs Made in the EU Eligible for Subsidies Only? Japanese Automakers Face Trouble in Europe

[Financial News, Tokyo—Correspondent Seo Hye-jin] The European Union (EU) is moving to advance legislation favoring electric vehicles produced within the bloc, putting Japanese automakers such as Toyota and Nissan on alert. Japanese automakers produce most of the EVs they sell in Europe outside the EU. If the bill passes, these vehicles are likely to have difficulty qualifying for purchase subsidies and tax benefits.
According to The Nikkei on the 29th, the original draft of the Industrial Promotion Act (IAA) under discussion in the EU would require 70% of automotive parts, measured by value, to be sourced from the EU and vehicles to be assembled within the bloc. Vehicles that fail to meet the requirements would be excluded from government subsidies and tax incentives.
Japanese automakers are particularly concerned about the company-car market, which is widely used in Europe. These leased vehicles are provided by companies as part of employees' compensation and can be used like personal cars. They account for as much as 60% of the European auto market.
Under the bill, EVs produced outside the EU would not qualify for tax benefits related to company cars, potentially putting them at a disadvantage when companies select vehicles. Individual buyers would also be unable to receive national subsidies for those vehicles.
Japanese cars currently account for more than 10% of Europe's new-car market, but their share of the EV market is only about 2%.
Toyota imports most of the EVs it sells in Europe from Japan and other locations. Suzuki mainly imports its EVs from India, while Nissan's flagship EV, the Nissan Leaf, is produced in the United Kingdom. Although the United Kingdom is geographically part of Europe, it is not an EU member. Toyota plans to produce EVs at its plant in the Czech Republic in 2028.
Responding with hybrid vehicles will also be difficult. The European Commission has proposed regulations requiring a 90% reduction in carbon dioxide emissions from new vehicles by 2035 compared with 2021 levels.
GlobalData, a British market research firm, forecasts that EVs' share of new-car sales in Europe will rise from 18% last year to 85% in 2035.
Representatives of the Japan Automobile Manufacturers Association and Japanese government officials met with members of the European Parliament in Strasbourg, France, on the 16th and asked them to consider Japan a "reliable partner." The request was aimed at securing an exception for Japan, which has an Economic Partnership Agreement (EPA) with the EU.
The deadline for submitting amendments to the European Parliament's bill is the 30th. After review by the European Parliament and the Council of the European Union, the bill is expected to be adopted and take effect as early as 2028.
[email protected] Seo Hye-jin Reporter