The European Union's move to tighten local-content requirements for electric vehicle (EV) subsidies presents implications for South Korean automotive group Hyundai Motor Group, which is expanding its operations in Europe.

According to industry sources, the European Commission is scheduled to release details of the proposed Industrial Acceleration Act (IAA) on 4th March, local time.

Similar in intent to the Inflation Reduction Act in the United States, the legislation is intended to promote domestic investment and support local industries.

A key element of the proposal involves revising EV subsidy eligibility criteria. Under the draft framework, foreign carmakers exporting EVs would be required to source more than 70% of components, excluding batteries, from within Europe in order to qualify for EU subsidies.

The measure is regarded as targeting Chinese manufacturers such as BYD and SAIC Motor, which have increased their market share in Europe into the double digits. The proposed rules are also expected to affect Hyundai Motor Group. The company has increased EV sales in Europe amid uncertainty in the US market, including the withdrawal of subsidies and potential tariff risks.

For Hyundai Motor and Kia, Europe is one of their three largest export markets, with annual sales exceeding 1 million vehicles.

According to the European Automobile Manufacturers' Association, Hyundai Motor and Kia sold 183,912 EVs in Europe in 2025, an increase of more than 50% compared with the previous year. A substantial share of the more than 10 EV models exported to Europe is manufactured in Korea, which may be relevant under the proposed framework.

Certain EV models are produced at Hyundai Motor's plant in the Czech Republic and Kia's facility in Slovakia; however, most are manufactured in Korea and subsequently exported.

Hyundai Motor stated that 152,190 vehicles, or 82.8% of its EV exports to Europe last year, were produced domestically. If the legislation is enacted in its current form, the company may need to revise its production arrangements, including adjusting elements of its parts supply chain to Europe in order to comply with the EU's origin requirements.

In the meantime, the Korea International Trade Association and other organisations are collecting industry feedback and conveying concerns to EU authorities. The specific origin rules have yet to be finalised, and potential exemptions for certain third countries remain under consideration.

A representative of Hyundai Motor Europe stated: "Products from countries with close trade ties to the EU, including those with free trade agreements, should be guaranteed equal treatment," referring to possible exemptions for vehicles manufactured in Korea.

Kia Europe also stated that it "supports efforts to strengthen European industry, but a Made in Europe framework should reflect the realities of global value chains."