1. Up 144%? Backfired After Trying to Block China
Lately, delegations from the Japanese auto industry have been frequently visiting Strasbourg, France, where the European Parliament is located. They have been reaching out to members of the European Parliament, pleading with them to look favorably upon Japanese automobiles. The reason behind this is the Industrial Accelerator Act (IAA) currently being pushed by Europe. This legislation is designed to protect Europe's automotive industry, particularly the electric vehicle market, by requiring that over 70% of major auto parts be produced within Europe in order for EVs to qualify for subsidies and tax benefits. In short, it mandates "Made in Europe." Why is Europe pursuing this? After creating subsidies and tax benefits to push for decarbonization and an all-in approach to EVs, European automakers did not see booming sales. Instead, automotive companies from other countries unexpectedly thrived. Among them, Chinese EV leader BYD saw a 128% increase in August compared to the previous year, based on figures from the UK. Across Europe as a whole, sales surged by 144%. In the first half of the year alone, 174,000 units were sold. BYD even outsold Tesla—a first-time occurrence. With Chinese cars performing this well, Europe cannot simply stand by and watch. However, it cannot recklessly impose import restrictions the way Donald Trump does either. Therefore, the EU created a law requiring more than 70% of parts to be made in Europe. Under this rule, no matter how many Chinese cars are sold, European factories will at least remain operational and European jobs will be preserved. Europe aims to push forward with this legislation through 2028.

2. Why Is Japan in an Uproar?
Why, then, is the Japanese auto industry in a panic? Japan lacks manufacturing plants in Europe. Nearly all Japanese electric vehicles are built in Japan and shipped over. Toyota is building a factory in the Czech Republic, but it is not expected to become operational until 2028. Nissan's situation is quite ironic. Nissan manufactures the Leaf, a compact electric vehicle, in Europe, but that facility happens to be located in the UK. Since the UK has left the EU, it is ineligible for EU subsidies and tax incentives. While the UK currently maintains certain tariff advantages compared to other manufacturing nations, it will receive virtually none of the benefits under the upcoming "Made in EU Act." Having built a plant in the UK 40 years ago to bypass European regulations, Nissan now finds itself unable to reap the rewards. Consequently, concerns are already surfacing in the UK over whether Nissan might relocate its operations to the EU region, putting 30,000 jobs at stake.

3. They Sold That? China Smiles, Japan Cries
What about Chinese automakers, whom the law is actually intended to block? BYD is constructing a factory in Hungary, injecting over 6 trillion won to build a production line with an annual capacity of 300,000 units. Vehicle assembly is reportedly scheduled to begin starting from the fourth quarter of this year. BYD also operates another facility in Hungary dedicated to electric buses and trucks. Another Chinese electric vehicle maker, Chery, is making remarkable moves. Chery's European plant is located in Barcelona, Spain. Rather than being newly built, this facility was acquired from an existing automaker. Purchased in 2021, its original owner was none other than Nissan. What could have served as a forward base for Japanese electric vehicles simply slipped into the hands of a Chinese car manufacturer. Furthermore, as is widely known, Volvo is originally a Swedish brand, but its current owner is China's Geely. Consequently, Volvo factories in Sweden and Belgium are effectively Chinese-owned plants. Volvo is also building a new EV plant in Slovakia. With Chinese electric vehicle factories already well-established across Europe, approximately 90,000 Chinese EVs were manufactured in Europe this year alone, with projections indicating that number could reach 1 million by 2030. Because Chinese automakers have secured production facilities and prepared in advance, concerns have been raised that they might simply import parts from China and only handle final assembly in Europe. To prevent such loopholes, this legislation was drafted to require that even the components be "Made in Europe." There are even plans to include conditions stating that foreign companies cannot hold more than 49% equity when building European factories, and that technologies and patents must be transferred to European partners. The law was clearly designed to curb Chinese electric vehicles, but the collateral damage is hitting Japanese cars instead. Unable to rapidly build factories locally, Japan is touring the European Parliament, pleading with lawmakers by arguing, "Are we not on the same side as you? Are we not a reliable partner?" and asking for special treatment. For Japan, which lacks not only "Made in Europe" status but even assembly plants within Europe, this law is truly devastating. Japan is scrambling for a reason: the EU has left a slight exception clause. It leaves the door slightly open by stating that "reliable partners may be granted treatment similar to European products." Consequently, nearby non-EU countries like the UK and Türkiye are knocking on that door, and Japan is now trying to step through it as well.

4. What About South Korea?
Let us pause to look at our own situation. Hyundai Motor has a manufacturing plant in the Czech Republic, where it produces the Kona Electric. Parts are also manufactured at the same facility by Hyundai Mobis. Kia operates a plant in Slovakia, where it builds the EV4 and began production of the EV2 this year. The EV2, in particular, is an affordable, compact electric vehicle that Europe is heavily promoting, meaning it is expected to receive the maximum benefits. Nevertheless, South Korea still sources more than half of its EV sales from outside Europe, indicating a need to further strengthen its response to the European market. Even so, compared to Japan, our position is much better. We also have numerous companies with European manufacturing bases, such as LG Energy Solution for battery production. The Industrial Accelerator Act, designed to curb Chinese products—particularly electric vehicles—is still over a year away from actual implementation. Meanwhile, building an automotive plant typically takes around three years, involving quite a few necessary procedures such as site selection, permitting, plant construction, and stabilization. In Europe, where administrative processes are notoriously slow, achieving full-scale mass production can take up to five years. For this reason, Japanese companies are currently attempting to resolve the crisis through preferential exemptions rather than building factories immediately. How this ultimately concludes remains to be seen.

(Reported by Kwon Yeongin | Produced by Shin Hee-suk | Video by Kim Si-nae | Video Editing by Ahn Jun-hyeok | Design by Lee Su-min | Produced by SBS Digital News)