The EU’s proposed Industrial Accelerator Act: what the battery industry needs to know—and do

Overview

As the EU’s clean energy and carbon neutrality goals drive demand for net-zero technologies, the capacity to meet them has grown much faster outside of Europe.

For batteries, that dependency is highly concentrated: China currently holds over 80% of global battery manufacturing capacity, and supplies around half of the EU’s supply of battery cells, modules and packs, and 81% of its anode active materials 

An additional pressure is overcapacity. Chinese output has scaled ahead of domestic demand, and the surplus is reaching the single market at prices European producers struggle to meet. Average profitability among EU automotive suppliers fell from 7.4% in 2017 to 5.1% in 2023, with more than 100,000 job cuts announced across 2024 and 2025. In the battery segment, the same factors have stalled several highly visible European gigafactory projects.

The Commission’s proposal of March 4, 2026 acknowledges that, more generally, EU manufacturing has fallen from 17.4% of GDP in 2000 to 14.3% today. This decline is framed as strategic exposure rather than a cyclical dip, drawing on the 2024 Draghi report and on the use of trade dependencies as leverage.

The proposed IAA sets a recovery target of at least 20% by 2035 with a strong focus on energy transition verticals. For batteries, this means making access to a growing share of European public demand conditional on where a battery and its components are made.

For battery manufacturers, project developers, investors and lenders, the question is not whether the proposed IAA affects market access to the EU generally—it does not. The key concern is whether specific revenue streams, financing structures and supply contracts remain eligible for the public demand channels to which the proposed IAA attaches EU (or equivalent) origin requirements.

Four measures, one framework

The proposed IAA amends and extends the EU’s existing Net-Zero Industry Act and operates alongside the Critical Raw Materials Act, and Battery Regulation*, advancing four measures: 

Two of these, permitting and foreign investment, fall outside this article’s focus, but deserve a brief mention. On permitting, the IAA requires single access points and compresses the timelines for qualifying projects. On investment, the new proposed screening regime for foreign direct investment (FDI) above EUR100 million in sectors expressly includes battery technologies and the battery storage value chain, where the investor’s home country holds more than 40% of global manufacturing capacity. FDI approval depends on a value-added test built around EU ownership limits, joint-venture structures and technology transfer, etc.

Battery implications: in brief

1. Two origin tracks, converging over time

Battery Energy Storage Systems (BESS) face a system-level EU origin requirement plus an escalating component count. Electric vehicle (EV) traction batteries face a component-count requirement nested inside the vehicle’s own origin test. Both tighten further from three years after entry into force, with both tracks requiring Union-origin cells and a battery management system. The EV traction battery track additionally requires cathode active material and reaches a higher component count overall, and both require further components in each case (see section 1*).

2. “EU origin” is broader than “Made in the EU”

Content can also qualify from  EU free trade or customs-union partners (for example, South Korea, Japan, Norway, Switzerland and Turkey) and, for public procurement only, WTO Government Procurement Agreement parties (including the U.S. and the UK). However, that equivalence can be withdrawn by delegated act (see section 1.3*).

3. China is the dominant non-agreement supplier

The requirements do not target any country by name, but their effect is concentrated. China has neither a free trade agreement with the EU nor GPA membership, so Chinese-origin content counts as third-country content against every threshold. China has already signalled possible WTO countermeasures, calling the proposal “institutional discrimination” (see section 2*).

4. The commercial stakes are real

The rules narrow the pool of qualifying suppliers (particularly for cells), turn origin compliance into a bankability question for the life of a contract, and reward vertical integration and EU-based recycling (see section 3*).

5. The detail is still moving

The IAA is only a proposal; key thresholds, component lists and the method for calculating Union-origin content are left to future delegated and implementing acts, and the application dates remain provisional (see sections 3.4 and 4*).

*See our in-depth analysis for the broader legislative picture and the sections referenced.

Action to take now

Battery manufacturers, project developers, investors and lenders should consider these five actions ahead of the IAA coming into effect:

• Running origin due diligence on their supply chains
• Stress-testing revenue models against the IAA’s demand channels
• Managing equivalence and reciprocity risk in sourcing contracts
• Building flexibility into contracts to absorb future delegated and implementing acts
• Monitoring the legislative process, whatever their position in the value chain

Next steps

This speed-read highlights the essentials of the proposed IAA. For a deeper dive into the IAA’s lead market origin requirements for batteries, including BESS, please read our in-depth analysis.