The European Commission is advancing the Industrial Accelerator Act (IAA) as a cornerstone of its green transition. The draft proposes a rapid shift toward locally sourced battery components, yet a study commissioned by ACEA and carried out by Mobility Global warns that the continent’s production capacity may not keep pace. If the regulation were to start in 2028, the shortage could deny roughly three million electric vehicles access to EU-linked incentives simply because compliant batteries would be unavailable.
Two-phase localisation requirements
The IAA is structured in two phases. In the first phase, triggered about six months after the rule becomes effective, a battery must contain at least three components of European origin and the cells themselves must be produced in the EU. Three years later, the threshold rises to five European components adding the battery-management system and the active cathode materials to the list. The intent is to create a fully European value chain, but the timetable leaves little room for the industry to adapt.
Supply-demand gap under the new rules
Mobility Global’s modelling shows that, even with the anticipated increase in cell output to 306 GWh by 2032 European supply would remain below demand in every scenario examined. Should the regulation be enforced in 2028, the shortfall would affect up to 3 million passenger cars that would miss the “Made in EU” incentive because compliant packs simply do not exist. The problem intensifies for medium- and heavy-duty commercial vehicles: by 2032 the deficit could reach 23 GWh a demand roughly four times the European offer. In practice, manufacturers would be forced either to redesign models to meet the quota or to forgo the subsidy altogether.
Industrial bottlenecks and technology mismatch
Several structural issues aggravate the supply crunch. Many of the gigafactories announced across the continent are tuned to produce nickel-manganese-cobalt (NMC) cells, while market trends are moving toward the cheaper lithium-iron-phosphate (LFP) chemistry that is currently dominated by Chinese producers. European-made cells also carry a price premium compared with imported units, and several announced projects still grapple with financing, permitting and start-up challenges. The recent setback at Northvolt exemplifies how even well-funded ventures can stumble before reaching commercial volume.
Upstream material scarcity
The study highlights a deeper weakness higher up the supply chain. Europe lacks sufficient domestic production of the active materials required for cathodes and anodes—referred to as CAM and AAM in industry jargon. Projections indicate that this shortage will likely persist until the 2038-2040 window, meaning that even if cell factories become operational, they would still depend on imports for the critical raw materials that define a “European-content” battery. This mismatch between fast-track localisation mandates and the slower evolution of upstream capacity could unintentionally curb the rollout of electric vehicles rather than accelerate a competitive European battery ecosystem.
At present, the Industrial Accelerator Act remains under revision and has not been adopted. Policymakers hope that the final text will protect the European automotive sector without imposing obligations that are, on paper, feasible but, in practice, unachievable. The balance between ambitious climate goals and realistic industrial capabilities will determine whether the EU can secure a truly domestic battery supply chain—or simply create a new regulatory hurdle for manufacturers.
