Europe’s auto industry is entering a fight over something more fundamental than which company sells the most electric vehicles. The question is increasingly where those cars, batteries and components are made—and how much European manufacturing should matter when governments spend public money.
Volkswagen Group CEO Oliver Blume has thrown his weight behind proposed “Made in Europe” rules as Chinese automakers expand aggressively across the region. Speaking in Paris ahead of the 2026 motor show, Blume argued that companies selling into Europe should compete under comparable conditions while contributing jobs and economic value locally. His intervention comes as Volkswagen restructures its own operations, Chinese brands gain market share and policymakers debate how far Europe should go to protect an industry supporting millions of jobs.
Blume Turns a Trade Debate Into an Industrial Policy Fight
Volkswagen’s message in Paris was deliberately broader than a complaint about inexpensive imported cars. At the company’s “For Europe” event on October 11, Blume described competitiveness as a shared responsibility between businesses and governments. Volkswagen, he said, has to simplify its organization, improve its products and become more efficient. Policymakers, meanwhile, have to establish conditions under which European production can remain commercially viable. He specifically backed the European Union’s proposed “Made in Europe” framework and argued that companies selling vehicles in Europe should also create jobs and value there.
That position places one of Europe’s largest industrial companies firmly behind a growing effort to connect market access and public support with local production. Volkswagen has an obvious stake in the outcome. It remains Europe’s largest automaker, with its brands collectively accounting for roughly a quarter of the regional market over much of the past decade. Yet the competitive environment is changing rapidly. BYD, Leapmotor, Chery and other Chinese groups are building recognizable brands in Europe, while Volkswagen is simultaneously trying to reduce costs and refresh its electric lineup.
“Made in Europe” Would Go Far Beyond Final Assembly
The European Commission’s Industrial Accelerator Act proposal shows why the phrase “Made in Europe” cannot simply mean putting a vehicle together in an EU factory. Under the proposed rules for certain publicly procured electric, plug-in hybrid and fuel-cell vehicles, final assembly would have to take place inside the European Union. In addition, at least 70% of the value of non-battery vehicle components would need to originate in the EU. That would force manufacturers to look much further down their supply chains than the location of the assembly line.
Battery and electronics requirements make the proposal even more significant. The Commission wants qualifying traction batteries to contain specified European-origin components, including battery cells. Additional requirements scheduled to apply later would cover cathode active material and battery-management systems, while at least 50% of electric-powertrain component value and major electronic-system value would also have to originate in the Union. The rules are aimed mainly at public procurement, public support programs and related incentives rather than simply banning foreign-made cars. The goal is to make public money generate industrial activity inside Europe.
Volkswagen’s Own Restructuring Shows Why Jobs Are Central
For Volkswagen, the employment debate is not theoretical. The group ended 2025 with about 662,900 employees worldwide when its Chinese joint ventures were included, down 2.4% from a year earlier. Its German workforce stood at roughly 284,000, a decline of 3.2%. By June 2026, Blume was telling investors that Volkswagen was pressing ahead with additional reductions, with the workforce expected to shrink by 19,000 during the year. Reuters reported at the time that more than 28,000 job reductions had been agreed as a binding target through 2030.
Volkswagen has also been attacking factory costs and excess capacity. The company’s earlier agreement with German employee representatives included a planned reduction of 734,000 units of technical production capacity at domestic plants. Those numbers help explain why Blume’s call for European manufacturing rules carries such political weight. A vehicle factory supports far more than workers on the final assembly line: component makers, logistics companies, engineering operations and local service businesses often depend on the same production network. Losing volume can therefore ripple through entire industrial regions long before a factory actually closes.
Chinese Brands Are No Longer a Marginal Presence
Anyone walking through the 2026 Paris Motor Show will see how quickly the competitive landscape has shifted. Twenty Chinese brands were expected at the event, twice the number that attended in 2024. Alongside established European challengers such as BYD and Chery are newer names including Aito and Avatr. The expansion is visible in registration figures as well. Reuters reported that Chinese brands reached a 10.7% share of the European market in the second quarter of 2026, a level that would have seemed remote only a few years earlier.
Plug-in hybrids have become especially important. Chinese manufacturers captured more than a quarter of that European segment as they diversified beyond pure battery-electric cars. That matters because existing EU countervailing duties were designed principally around battery-electric vehicles imported from China. Expanding hybrid lineups gave manufacturers another route into the market at a time when European consumers were still weighing charging access, purchase prices and driving range. The challenge facing Volkswagen is therefore not a single Chinese company or technology. It is an increasingly broad portfolio of competing vehicles arriving across several price points and powertrains.
China’s Cost Advantage Was Built on Enormous Scale
China’s influence on electric-car economics starts with the sheer size of its industry. The International Energy Agency estimates that China accounted for close to three-quarters of global electric-car production in 2025. Chinese factories produced roughly 16 million electric cars that year, while exports more than doubled to over 2.5 million. In the first half of 2026, electric-car exports continued rising rapidly as weaker domestic demand encouraged manufacturers to look overseas for customers and maintain factory utilization.
That industrial scale has also affected prices. According to the IEA, 70% of battery-electric cars sold in China in 2025 were already cheaper than the average conventional car. Intense competition among domestic manufacturers, highly integrated supply chains and China’s enormous battery industry have all contributed to the price pressure. China also produced more than 80% of the world’s battery cells in 2025. European manufacturers therefore face competitors emerging from a market where electric vehicles are manufactured in huge volumes and price competition is severe. When those companies export aggressively, the commercial battle that began inside China can quickly arrive in European showrooms.
Europe Has Millions of Jobs Tied to the Outcome
The European Commission estimates that the automotive industry supports 13 million jobs and contributes about 7% of EU gross domestic product. Those figures encompass far more than recognizable vehicle brands. The industry includes suppliers producing braking systems, electronics, transmissions, seats, thermal-management equipment, software and thousands of less visible components. That is why job losses among suppliers can provide an early warning of stress well before the effects become obvious to car buyers.
Data from the European Association of Automotive Suppliers, or CLEPA, illustrate that pressure. The group recorded 54,000 announced supplier job cuts in 2024 and another 50,000 in 2025. During the first half of 2026, suppliers announced a further 18,900 reductions, although new jobs were also being created, particularly in electrification-related businesses. These are industry-association figures based on announced positions rather than a government tally of completed layoffs, so they should be understood in that context. Even so, they show why the argument over local content has moved from trade-policy circles onto factory floors and into national politics.
Europe Is Building More Than One Line of Defence
“Made in Europe” rules would sit alongside measures the EU has already taken against subsidized Chinese electric vehicles. In 2024, the European Commission imposed additional countervailing duties after investigating Chinese battery-electric vehicle subsidies. The definitive rates included 17% for BYD, 18.8% for Geely and 35.3% for SAIC, on top of the EU’s normal import tariff. The measures were established for five years unless reviewed. They were meant to address what Brussels concluded was unfair state support rather than simply block Chinese manufacturers because of their nationality.
The market quickly evolved. Chinese plug-in hybrid imports subsequently surged, with Reuters reporting an 86% increase alongside a roughly 20% fall in prices. That prompted another response. In October 2026, China and the EU reached an understanding that European Trade Commissioner Maroš Šefčovič said could reduce projected Chinese hybrid and plug-in hybrid exports to the bloc by more than half over four years. Implementation details still matter, and the broader trade relationship remains unsettled. Blume nevertheless welcomed the arrangement, reflecting how urgently European automakers want policymakers to respond as Chinese product strategies change.
Chinese Automakers May Respond by Becoming European Manufacturers
Local-content requirements do not necessarily mean Chinese automakers disappear from Europe. They could instead accelerate Chinese investment inside the region. BYD, for example, has been preparing to start vehicle production at its first European passenger-car plant in Hungary and has explored taking over an existing factory for another European manufacturing site. Chery has been working with Spain’s EBRO on production at the former Nissan complex in Barcelona after delays pushed the timetable further into 2026.
SAIC has also moved toward European manufacturing. In June, the Chinese group behind MG announced plans for a factory in Ferrol, Spain, with an initial investment of approximately €200 million. The proposed operation could eventually produce about 120,000 vehicles annually and create around 1,000 direct jobs. Those investments reveal one possible effect of tougher European industrial rules: rather than stopping Chinese brands from competing, they may change where those companies invest and source components. For policymakers, however, an assembly plant using mostly imported parts creates less regional value than a deep local supply chain. That is why the EU proposal reaches into batteries, powertrains and electronic systems.
Even European Industry Does Not Agree on Every Detail
Support for local manufacturing does not mean automakers and suppliers agree on precisely how the rules should work. Volkswagen, Renault and Stellantis—together responsible for more than 60% of EU vehicle production—have called for a simple and predictable framework. Their joint proposal emphasized a system in which 70% of vehicles would derive 70% of their value from the EU, with research, engineering and production considered when determining European value creation. They have also warned that any framework must recognize the cost disadvantage European factories face against global competitors.
Suppliers have pushed for tougher safeguards in some areas. CLEPA has advocated a minimum 75% local-content threshold when defining a European vehicle and has argued that trusted trading partners, including the UK and EFTA countries, need careful treatment. Other manufacturers have raised different concerns. Toyota and Jaguar Land Rover have warned that tightly drawn rules could disrupt established supply chains, increase costs and discourage investment involving nearby non-EU production centres. Policymakers therefore face an uncomfortable balancing act: strengthen European manufacturing without making European-built cars so expensive or complicated that they become less competitive.
Industrial Protection Cannot Replace Competitive Cars
Volkswagen itself appears to recognize that regulation can only buy room to compete. Its Paris presentation is centered partly on more accessible electric cars from Volkswagen, Cupra and Škoda. The group’s Electric Urban Car Family includes the Cupra Raval, Volkswagen ID. Polo, Škoda Epiq and Volkswagen ID. Cross. Volkswagen says the four models had accumulated almost 150,000 orders before deliveries began. They share more than 80% of their components and technologies and are produced across the company’s Martorell and Pamplona operations in Spain, an approach intended to spread development and manufacturing costs across several brands.
That may ultimately be the more important test of Blume’s strategy. Europe can use procurement rules, local-content requirements and trade measures to prevent industrial policy elsewhere from hollowing out its manufacturing base. Those policies cannot guarantee that customers will prefer a European vehicle. Volkswagen still has to match Chinese rivals on price, software, battery technology, design and manufacturing efficiency. The debate over “Made in Europe” is therefore not simply about keeping foreign cars out. It is about whether Europe can preserve enough industrial scale, engineering capability and investment to keep building competitive cars of its own.
