EU's Industrial Accelerator Act Faces Criticism for Failing to Fully Address Battery Supply Chain Onshoring, as Northvolt Bankruptcy Underlines Sector Vulnerability
A new analysis of the EU's Industrial Accelerator Act — the legislative package designed to strengthen European industrial competitiveness and secure critical supply chains — has identified significant gaps in its treatment of the battery manufacturing sector. The critique follows the bankruptcy of Northvolt, the Swedish battery maker that collapsed in early 2025, which exposed how fragile Europe's homegrown battery production capacity remains. The analysis points to a structural asymmetry in the Act's current form: battery electric vehicles (BEVs — battery-powered cars) sold through the corporate channel (which accounts for approximately 60% of new car sales) must use EU-made batteries and battery components to qualify for national tax incentives. However, BEVs sold into the private market operate under a broader definition of 'made in EU' that encompasses all countries with which the EU has signed free trade agreements — a rule that critics argue undermines the onshoring intent. The analysis specifically highlights cathode active materials as the most valuable component in a battery and the area of highest EU dependency on Chinese supply, describing the current regulatory treatment as insufficient to reduce that reliance. Separately, industry body VDMA (the German Mechanical Engineering Industry Association) commented on the EU Competitiveness Council's agenda, calling for a focused European Competitiveness Fund and questioning whether the Industrial Accelerator Act's local content and CO₂ emissions rules are sufficiently comprehensive to protect the broader EU industrial base.
Why this matters
The Industrial Accelerator Act creates a complex matrix of regulatory and transactional work: companies investing in EU battery manufacturing need advice on qualifying for incentives under the Act's local content rules, while supply chain restructuring — moving away from Chinese cathode material suppliers — generates technology transfer agreements and joint venture documentation. The Northvolt bankruptcy is a live data point illustrating the execution risk in European battery gigafactory projects, which will inform how lenders structure security packages and covenants in future project finance facilities for similar assets. The 'why now' driver is the confluence of post-Iran-war energy price volatility — which strengthens the investment case for domestic clean energy manufacturing — and the EU's recognition that Northvolt-style failures are a systemic risk to its green industrial strategy.
On the Ground
On an EU battery manufacturing project, a trainee would assist with regulatory filing coordination to ensure compliance with local content certification requirements under the Act, and support due diligence on IP portfolios where a client is acquiring or licensing cathode material technology to reduce Chinese supply dependency.
Interview prep
Soundbite
A 60%-versus-private-market asymmetry in the Act's local content rules is exactly the kind of drafting gap that generates years of regulatory arbitrage litigation.
Question you might get
“A client is considering building a battery gigafactory in Germany and wants to qualify for incentives under the EU Industrial Accelerator Act — what legal and regulatory due diligence would you prioritise before they commit capital?”
Full answer
The EU Industrial Accelerator Act — designed to re-shore critical manufacturing including battery production — has been criticised for a structural inconsistency: the 'made in EU' battery requirement applies to the corporate car-sales channel (60% of sales) but not to private buyers, where a looser definition referencing free trade agreement partners applies. The commercial significance is that this gap dilutes the incentive for manufacturers to invest in fully EU-based battery supply chains, perpetuating dependency on Chinese cathode materials. Against the backdrop of Northvolt's bankruptcy, this matters because European battery project finance is already capital-intensive and politically exposed; incomplete legal incentive structures increase the risk that future gigafactory projects attract insufficient private investment. VDMA's parallel call for a European Competitiveness Fund signals that industry does not regard the Act alone as sufficient. This is a live regulatory drafting risk that energy and project finance teams will be navigating for years.
Sources
My notes
saved