The 'Made in Europe' dilemma in automotive

The European Union is changing direction in its industrial policy. As the understanding of efficiency based on free trade and global supply chains gives way to a more protectionist framework, 'Made in Europe' is becoming the symbol of this transformation.

On paper, the goal is clear: to free European industry from its dependence on China and the Far East and to keep strategic sectors within EU borders. However, in multi-layered production networks like the automotive industry, these goals are producing much more complex results than expected.

WHAT IS 'MADE IN EUROPE' AND WHY DID BRUSSELS IMPLEMENT IT?

Although 'Made in Europe' may look like an origin label, it is one of the tools of the industrial protectionism that the EU has been shaping in recent years. This approach aims to clearly prioritize products manufactured within Europe in incentive mechanisms, subsidies, and the regulatory framework. The implementation gained momentum after 2022; throughout 2023 and 2024, it turned into concrete policy headings for the automotive supply industry.

This approach is based on a localization logic that covers not just the final product, but the entire production process. Brussels' message is clear: critical manufacturing must remain in Europe and supply chains must be restructured within EU borders.

In other words, the issue is not just that 'the car should be assembled in Europe'; it is that the supply chain, down to the sheet metal parts, electronic components, and critical semi-finished goods of that car, should be provided from within the EU as much as possible. At this point, 'Made in Europe' has effectively turned into a trade policy that makes it difficult for the European main industry to source parts and semi-finished goods from countries outside the EU. Even if sourcing from outside Europe is not directly banned, it is economically penalized through exclusion from incentives, creating disadvantages, and regulatory burdens.

Brussels defends this policy with three main justifications. First, the supply chain disruptions experienced during the pandemic revealed Europe's dependence on external sources for critical components and brought the need for 'strategic autonomy' to the agenda. Second, China's rapid gain in market share in electric vehicles and battery technologies is putting European brands under competitive pressure even in their own domestic markets. Third, the high incentives provided by the US through the Inflation Reduction Act (IRA) for domestic production are pushing Brussels toward a similarly Europe-first industrial policy.

WHY IS THIS POLICY CHALLENGING FOR EUROPE?

In today's automotive world, the European industry does not operate on the basis of domestic production in the classical sense, especially in automotive. The concept of 'domestic' is defined more by the depth of the supply chain, technology partnerships, and cost balance than by the geography where the factory is located.

In other words, a car being European does not mean that all its components are produced within European borders. Countries such as Japan, South Korea, the United Kingdom, and Turkey are links in the European automotive chain in terms of sheet metal parts, engines, batteries, electronic systems, and critical semi-finished goods. These countries are not just low-cost suppliers; they are also production partners that offer advantages in engineering, quality, and scale.

Therefore, the new framework drawn by Brussels under the 'Made in Europe' heading targets not only actors outside Europe but also Europe's own production model. The real point of tension arises exactly here. Because this policy is based on an understanding that effectively traps the concept of 'domestic' within geographical borders. Yet, the system that automotive giants have built for years is built on efficiency and competition rather than geography. For this reason, Europe's leading manufacturers are giving a clear warning to Brussels: This structure erodes the competitiveness of the domestic industry.

The 'Made in Europe' approach challenges this structure on two main points:

The first is cost. Every regulation that mandates production within Europe drives up costs due to labor, energy, and environmental regulations. This makes price competition, where European brands are already under pressure from Chinese manufacturers, even more difficult. Automotive giants are telling Brussels clearly: High-cost localization means losing in the global market.

The second pressure point is flexibility. Global production networks provide resilience against crises. A supply problem in one center can be compensated for by another. However, squeezing production into a narrow geography eliminates this flexibility. For the European industry, this means fragility rather than efficiency.

For this reason, Europe's major automotive groups and suppliers are giving the same warning to Brussels: The problem is not where production takes place, but whether it is competitive.

HOW WILL THE TURKISH AUTOMOTIVE SUPPLY INDUSTRY BE AFFECTED?

The main reason why this debate is critical for Turkey is that Turkey is not just a country that provides parts for an assembly line, but a supply base with high technical competence that exports sheet metal parts, engines, and powertrain components to main industries such as Mercedes-Benz, BMW, and similar manufacturers.

Many companies operating in Turkey have been approved by these manufacturers after long and costly audit processes and have been certified in terms of quality, sustainability, and process management. These companies do not just produce parts; they also bring the production culture, engineering standards, and quality discipline of the German automotive industry to the field.

If the definition of 'Made in Europe' is limited only to EU member countries, this accumulated expertise faces the risk of effectively being devalued. If the integration established over the years between Turkey and the European automotive industry is broken, this will directly affect not only Turkey but also the German main industry. Narrowing the pool of approved suppliers increases costs, extends delivery times, and reduces production flexibility. This situation creates three main risks: competitive disadvantage, investment shift, and supply chain disruption. The most critical risk is the last one.

PROTECTION OR STRATEGIC BLINDNESS?

At a time when global competition is intensifying so much, 'Made in Europe' represents an approach that tries to redefine industry with geographical borders. Yet, in today's automotive world, competition is won not by flags, but by speed, cost, and supply flexibility. Europe's real need is not to close its doors, but to keep its reliable, approved production partners, with whom it has worked for years, within the system. It is becoming increasingly difficult for the European automotive industry to maintain its competitive power without integrated suppliers like Turkey.

However, the 'Made in Europe' approach is moving forward without making this distinction. This step, taken with the goal of reducing dependence on China, creates a serious contradiction that places Europe's allied suppliers in the same category as strategic competitors. In this form, 'Made in Europe' carries the risk of turning into an industrial policy that narrows Europe's position in global production networks, increases costs, and reduces flexibility, rather than a lever that strengthens the industry.