Europe’s two largest carmakers, Volkswagen and Stellantis, are no longer asking Brussels for protection against growing Chinese competition. They are pushing for a structural rewrite of how Europe’s environmental rules interact with industrial competitiveness.
In a joint opinion piece published in Les Echos and Il Sole 24 Ore, two leading business dailies in France and Italy, Stellantis CEO Antonio Filosa and Volkswagen Group CEO Oliver Blume call for the creation of a ‘Made in Europe’ label. This would be combined with what they describe as a ‘CO₂ bonus’ for electric vehicles produced in Europe.
Publicly framed as a response to unfair competition and a way to strengthen Europe’s climate ambitions, the proposal looks, more fundamentally, like an attempt to bring EU climate regulation closer in line with the cost structures and competitive constraints of Europe’s established carmakers.
Range of advantages
According to the two CEOs, the label would not be a simple origin mark but a regulatory and economic instrument. Vehicles qualifying as ‘Made in Europe’ would be identified through a dedicated EU label and become eligible for a range of advantages.
These could include access to purchase incentives, preferential treatment in public procurement, and, most importantly, regulatory benefits within the EU’s CO₂ compliance framework.
The idea is that vehicles built to European social and environmental standards should receive a CO₂ credit that reflects the higher emissions and costs embedded in their production.
CO2 bonus
Crucially, Filosa and Blume argue that this logic should apply not only at the model level but also at the manufacturer level. If a carmaker produces a “large share” of its electric vehicles in Europe under the proposed criteria, the associated CO₂ bonus should be recognised across its entire electric fleet.
This would reward companies that anchor most of their production in Europe with lower compliance pressure, potentially reducing exposure to the multi-billion-euro penalties embedded in the EU’s fleet emissions rules.
The proposal also comes at a moment when regulatory pressure has eased rather than intensified. An analysis by the International Council on Clean Transportation (ICCT) shows that most European carmakers are now closing the gap to their CO₂ targets.
It was helped by rising EV sales and by EU rules that allow compliance to be averaged over several years. Volkswagen itself avoided a hypothetical multi-billion-euro fine in 2025 under the revised framework.
Reshaping the rules
Seen in that light, the push for a ‘Made in Europe’ CO₂ bonus is less about avoiding penalties today than about reshaping the rules ahead of the next competitive squeeze — when price pressure from Chinese electric vehicles, rather than emissions compliance, becomes the dominant threat.
While the proposal does not alter Europe’s formal phase-out timeline for combustion engines, it would introduce additional flexibility into fleet compliance. Manufacturer-level CO₂ bonuses tied to European EV production would allow higher-emission models elsewhere in the portfolio to be offset.
In practice, this could keep combustion and hybrid vehicles economically viable for longer, extending the transition quietly rather than reversing it outright.
No knock-down assembly
The proposal deliberately avoids spelling out exact thresholds, but its direction is clear. Qualification would require more than final assembly, ruling out simple knock-down assembly designed to bypass tariffs or qualify for incentives.
The label would be tied to ‘equivalent conditions of production’, implying European labor standards, environmental rules, and a significant share of value creation within the EU.
Content thresholds of 70-75 per cent are being floated in political discussions, particularly around batteries, which account for most of an EV’s cost and embedded emissions. Yet Europe’s limited battery cell capacity makes such thresholds difficult to meet in the short term.
Adjusting climate regulation
This is where the strategic logic becomes apparent. Stellantis and Volkswagen are not merely asking for consumer subsidies; they are pushing to make climate regulation itself an industrial policy tool.
By embedding production location into CO₂ accounting and incentive eligibility, the EU would structurally favor manufacturers with deep European industrial footprints, benefiting Volkswagen directly, and Stellantis selectively, as its US production would not qualify.
Elephant in the room
There is an elephant in the room. European carmakers themselves have long used China as a low-cost production base for electric vehicles sold back into Europe, benefiting from mature battery supply chains and lower costs.
A strict ‘Made in Europe’ label would strip those vehicles of incentives and regulatory advantages, even when sold under European brands. In effect, the proposal asks Brussels to help manufacturers unwind their own offshoring strategies just as Chinese competitors are scaling the same model far more aggressively.
The timing is no coincidence. Both companies face mounting pressure from cheaper Chinese electric vehicles entering the European market, while simultaneously grappling with the high capital costs of electrification, fragile EV margins, and tightening CO₂ targets.
A production-based CO₂ bonus would ease regulatory pressure just as EV demand growth slows, freeing up capital that could be reinvested in European factories and supply chains. The proposal is presented as a virtuous circle: lower penalties, more local investment, stronger European industry.
Uneven effects
The distributional effects, however, would be uneven. Large legacy manufacturers with established European plants stand to gain the most. Suppliers, battery projects, and industrial regions would benefit from stronger localisation incentives.
On the other side, exporters of finished vehicles into Europe — most notably Chinese EV manufacturers — would see their competitive position weakened.
Even with existing tariffs, exclusion from incentives and regulatory advantages would raise effective prices. Consumers could face fewer low-cost options in the short term, particularly in the small and compact segments.
Chinese brands assembling cars in Europe occupy a grey zone that the proposal intentionally leaves open. In principle, the label would be brand-neutral: a vehicle built in Europe under the required conditions could qualify regardless of ownership. In practice, much depends on how strictly ‘Made in Europe’ is defined.
Other carmakers have so far reacted cautiously. Many share the concern about Chinese competition and welcome a stronger European industrial stance, but few are eager to endorse a mechanism that could disrupt global supply chains or provoke trade retaliation.
