By: Sarah Salah
The European Green Deal begun to adopt new investment screening mechanisms and economic security measures amid intensifying competition, fragile supply chains, and the global resurgence of industrial policy. The European Union’s new Industrial Accelerator Act (IAA) was officially adopted by the European Commission in March, and is currently under review by the European Parliament and Council of the European Union, with some key provisions expected to take effect as early as 2027. Unlike previous EU initiatives, which largely emphasized openness to global capital, the IAA introduces a system of conditional foreign direct investments (FDIs) in these strategic sectors. The Act targets sectors central to the energy transition, including battery technologies, electric vehicles, solar photovoltaics, and critical raw materials, but excludes portfolio investments, intra-EU investments, and certain investments covered under existing trade agreements.
A major concern is the growing concentration of Chinese investment in Europe’s electric vehicle (EV) sector, which highlights the extent to which European automotive industries are exposed to foreign capital. China remains the world’s electric car manufacturing hub, accounting for more than 70% of global production in 2024. But between 2014 and 2025, Chinese FDI in the EU reached approximately $270 billion, with nearly $50 billion directed toward Europe’s EV industry alone, valued at $209 billion. China has emerged as the second-largest external investor in Europe’s EV supply chain, trailing only intra-EU investment flows and surpassing both the United States and other Asian economies since 2018. In 2024, EV-related projects accounted for €4.9 billion, around 83% of all Chinese investments in Europe.
Under the IAA, investments exceeding €100 million in designated strategic sectors, originating from countries accounting for at least 40% of global production, will face screening by designated investment authorities. Approval would depend on whether foreign investors satisfy at least four of six predefined conditions, rather than all conditions automatically applying in every case. These include a 49% cap on ownership, participation in joint ventures with EU firms, requirements related to technology transfer or licensing of intellectual property and know-how, spending a minimum 1% of annual revenue in R&D within the EU, and ensuring that workforce requirements are at least 50% EU-based. While designed to secure economic benefits like innovation, jobs, and value chain integration within the EU, these requirements also introduce significant administrative burdens. The added layers of screening, compliance, and reporting could slow investment decisions and deter firms wary of regulatory complexity, effectively making bureaucracy itself a barrier to entry.
The reactions of industries affected by the Act have been mixed. While some European companies viewed the Act as a necessary step toward protecting competitiveness, others, particularly foreign investors and globally integrated industries, have called into question the potential implications for market openness and investment flows. Among domestic actors, support for the IAA is largely driven by concerns over technological sovereignty, exposure to foreign takeovers, and the need for a level playing field in a competitive global economy. In particular, organizations such as Eurochambres, which represents more than 20 million businesses including small and medium enterprises, have welcomed the ambition of the Act but emphasized the importance of ensuring that its implementation remains practical and predictable.
Foreign-based entities have unsurprisingly been more critical of the new proposed measures. Chinese officials claim that the IAA distorts fair competition and disrupts the global industrial supply chain. They urged the EU to follow World Trade Organization rules and not to engage in protectionism. Japan-based Nissan has indicated that restrictive local content requirements could affect the viability of its European EV operations in Europe. More significantly, the German Association of the Automotive Industry has criticized the Act for failing to adequately reflect the realities of globally integrated supply chains, warning that such measures could undermine the competitiveness of European industry as a whole. The competing pressures highlight the broader tension at the heart of EU clean industrial policy measures. While the IAA can be understood as a tool to align capital flows with supply chain de-risking and broader economic security priorities, it may introduce new frictions and unintended consequences.
As the IAA continues to undergo amendments, its ultimate success will hinge on careful calibration. Transparency and ease of navigation, particularly around local content and technology-sharing, would facilitate predictability in its implementation. At the same time, the EU will need to preserve channels for strategic foreign investment, especially in capital-intensive sectors where domestic capacity alone may fall short. If the Act is overly complex or restrictive, it risks deterring the very investment it seeks to shape.
Sarah Salah was a Spring 2026 Intern for the Energy & Climate program at ORF America.