Japan’s automakers woke up on October 17 to unwelcome news from Brussels. On October 16, France and Germany agreed on a joint position for the EU’s “Made in Europe” rules. Under it, EVs built in Japan would not qualify for European purchase incentives and public procurement preferences, Yomiuri and Nikkei reported.
It isn’t law yet. But when the EU’s two largest economies line up behind something, it usually ends up close to the final version.
What France and Germany agreed
The deal links two big EU files that had been stuck for months, as newmobility.news explains:
- The Industrial Accelerator Act (IAA). The European Commission proposed it in March 2026. It ties public support for EVs, such as subsidies, tax breaks and government purchases, to production inside the EU. The current draft also requires 70% EU-made parts.
- Who counts as “European.” The Franco-German position focuses on the 27 EU members, with conditional exceptions for close neighbors such as the UK and Norway. Japan, South Korea and Turkey are left out.
- Softer 2035 CO₂ rules. In exchange, Germany won more flexibility. The Commission’s proposed 90% fleet CO₂ cut for 2035 would no longer require offsetting the last 10% with credits, and “supercredits” for EVs would cover EVs of all sizes, not just small ones.
In a joint statement, Paris and Berlin said the goal is “ensuring that the cars of the future are produced in Europe.” France had pushed for a strict EU-only definition, mostly as a defense against the flood of Chinese EVs. Japan ended up caught in the same net.
Toyota: “We are not a guest in Europe”
Toyota pushed back within hours. “Toyota is not a guest in Europe. We are a European manufacturer,” said Yoshihiro Nakata, president and CEO of Toyota Motor Europe. A day earlier, Toyota had publicly argued that Japanese-brand cars should be eligible for the incentives.
Toyota has a point. It builds the Yaris and Yaris Cross in France, the Corolla in the UK and the C-HR in Turkey. It employs more than 26,000 people in Europe and has invested over €12 billion there since 1990. It wants a “Made with Europe” approach that includes trusted trade partners, with European-content rules phased in gradually and no strict localization before 2030.
The Japanese government and automakers plan to step up demands for changes as the bill moves through EU member states and the European Parliament. Nikkei warns that if the exclusion survives, a big drop in sales for Japanese brands in Europe would be hard to avoid. EVs are expensive, and in many European markets incentives decide which car people buy.
Where Tesla fits
Tesla comes out of this well positioned. Giga Berlin builds the Model Y inside the EU, and it’s expanding. Tesla will file permits in December for a second production hall on the way to 1 million vehicles a year. Tesla’s bet on building where it sells looks smart under almost any version of these rules.
The Japanese brands most exposed are the ones that ship EVs to Europe from Japan. Toyota itself has said it wants European content requirements of 70% phased in over time. It’s planning for localization, just not this fast.
The EVX News take
We’re of two minds. Building EVs and batteries in Europe is good for jobs, supply chains and emissions from shipping, and Tesla shows it can be done. But EU incentives exist to get more people into clean cars, and shutting out trusted allies like Japan and Korea means fewer affordable EVs in showrooms. Pairing the deal with weaker 2035 CO₂ rules makes the climate trade-off worse, not better.
Our advice to Europe: be tough on dumping and subsidies, but don’t punish partners who invest in your factories. Our advice to Japan: the fastest way to qualify for “Made in Europe” is to build more EVs in Europe. Tesla already found the shortcut. It’s called a Gigafactory.
Sources: Yomiuri Shimbun (Japanese), Nikkei (Japanese), Nikkei on Toyota’s position (Japanese), newmobility.news, Élysée.
— The EVX News team
Featured image: Berlaymont building, European Commission, Brussels, by Euro Pictures, via Wikimedia Commons, licensed under CC BY 2.0.
