The European Commission is preparing legislation that would limit purchase incentives and access to public tenders to vehicles largely manufactured within the European Union, in a move aimed at supporting the bloc’s automotive industry amid growing competition from Chinese manufacturers.

Under the proposed industry support law, expected to be published in March, electric vehicles, plug-in hybrids and hydrogen fuel cell vehicles would qualify for incentives and participation in public procurement only if they meet two conditions: the vehicle must be assembled at a production facility within the European Union, and at least 70 percent of its components by value, excluding the battery, must be manufactured in Europe.

The initiative follows increasing pressure on European carmakers, who have struggled to compete with lower-priced Chinese models entering the European market.

European officials state that the measure is intended to protect millions of jobs within the automotive sector.

Several Chinese manufacturers have already established or are planning production facilities within the EU, partly to avoid potential trade restrictions.

BYD has opened a factory in Hungary.

Chery has established a plant in Spain and is seeking to acquire two Volkswagen facilities in Germany.

Changan has announced plans to build its own factory in Europe.

Dongfeng is seeking to open a plant in Italy.

Leapmotor plans to use a Stellantis facility in Spain.

SAIC and Great Wall are also searching for factory sites in Spain, Poland and other locations.

Major European manufacturers including Volkswagen and Stellantis, which owns brands such as Peugeot, Citroën, Opel and Jeep, support the proposal.

Suppliers of automotive components and green technology also view the measure as a growth opportunity.

Other manufacturers, including BMW, have warned that the plan could increase costs and create additional bureaucratic complexity.

European law allows the Commission to introduce industry measures at the bloc level, and the proposed framework would apply across member states once adopted.

The draft legislation has not yet been formally enacted.