Europe’s effort to rebuild its industrial base is creating a new fault line with Türkiye, one of the bloc’s most deeply integrated manufacturing partners. A Franco-German automotive compromise announced on October 16, 2026, would conditionally accommodate Britain under emerging “Made in Europe” rules while leaving Türkiye without the same route. The proposal is not yet European Union law, and Turkish goods would retain ordinary market access under the customs union. Yet exclusion from public procurement and subsidy-backed demand could place billions of euros in future automotive, metals and clean-technology exports at a competitive disadvantage, reshaping investment decisions on both sides of the border.
European preference moves from slogan to industrial policy
The dispute arises from the European Commission’s proposed Industrial Accelerator Act, published on March 4, 2026. The legislation would use procurement, auctions and public-support programs to increase demand for low-carbon and European-origin products in automotive manufacturing, steel, aluminium, cement and net-zero technologies.
The economic objective is ambitious. According to the European Parliamentary Research Service, the Commission wants manufacturing to account for 20 percent of EU gross domestic product by 2035, compared with 14.3 percent in 2024. The proposal responds to high European energy costs, subsidized foreign competition and concentrated supply chains, particularly in China, with which the EU recorded a €359.8 billion goods deficit in 2025.
The proposed law does not impose a universal import ban. Instead, it separates ordinary access to the single market from access to demand supported by public money. Products that fail the origin tests could still be sold commercially, but they might not qualify for government contracts, consumer incentives, renewable-energy auctions or other support programs.
For electric, externally chargeable hybrid and fuel-cell vehicles, the Commission draft would require final assembly inside the EU. At least 70 percent of the ex-works value of non-battery components would also have to be of Union origin, alongside specified European battery components. The requirements would tighten three years later to cover additional battery, electric-powertrain and electronic components, according to an analysis by Türkiye’s Economic Development Foundation, or İKV.
The law remains under negotiation. European Parliament co-rapporteurs proposed in September to replace automatic recognition of some partner countries with an opt-in system based on reciprocity, economic-security compatibility, competition standards, labor commitments and climate policy. Their draft is not Parliament’s final position, but it demonstrates that Türkiye’s eligibility cannot be taken for granted.
Türkiye’s automotive exposure is immediate and concentrated
Türkiye’s industrial relationship with Europe is too large to treat the issue as a marginal trade dispute. EU-Türkiye goods trade reached a record €217.6 billion in 2025, according to the European Commission. The EU purchased €103.3 billion of Turkish goods and supplied €114.3 billion, while absorbing 42.7 percent of Türkiye’s total goods exports.
Automotive manufacturing is the clearest exposure. The Uludağ Automotive Industry Exporters’ Association, known as OİB, reported that Turkish automotive exports rose 11.6 percent to $41.5 billion in 2025. EU countries purchased $30.11 billion, equal to 72.5 percent of the sector’s exports. Germany alone bought $6.61 billion, followed by France at $5.09 billion, Spain at $3.42 billion and Italy at $3.29 billion, according to OİB data.
This does not mean $30 billion of trade would disappear. The more defensible risk is a progressive loss of competitiveness as European demand shifts toward subsidized electric vehicles and publicly procured zero-emission fleets.
İKV calculates that Türkiye exported approximately $1.2 billion of electric buses, minibuses, trucks, vans and light commercial vehicles to the EU in 2025. Electric models already represented 11.6 percent of Turkish bus and minibus exports to the bloc, and 14.6 percent of goods-vehicle exports. Those are precisely the segments in which municipal procurement, corporate-fleet incentives and public support can materially influence purchasing.
The problem is not necessarily Turkish component origin. Under the Commission proposal, content from a customs-union partner could, subject to the relevant conditions, count as equivalent to EU content. The difficulty is the separate requirement that qualifying vehicles be assembled geographically inside the Union. An electric bus completed in Bursa could therefore fail even if many of its components were acceptable when installed in a vehicle assembled in France or Germany.
That distinction affects established European production networks. İKV notes that Ford Otosan’s Kocaeli operations manufacture the electric E-Transit Custom, while Karsan’s e-JEST and e-ATAK have led important European electric minibus and midibus segments. Renault, Toyota and other international manufacturers also use Türkiye as a production and export base.
The customs union no longer guarantees equal industrial treatment
The EU-Türkiye Customs Union has governed trade in industrial goods since 1996, removing tariffs and requiring Türkiye to align with important elements of EU customs and technical legislation. Its limitation is now commercially significant: it does not cover services or public procurement.
In an April 24 response to the European Parliament, Commission Executive Vice-President Stéphane Séjourné said the Industrial Accelerator Act would not amend the customs union. He also confirmed that, under the Commission draft, Turkish content could be deemed equivalent to Union origin for specified requirements. That interpretation protects some suppliers, but it does not automatically give Turkish companies direct access to EU tenders or erase geographic assembly conditions.
Turkish Trade Minister Ömer Bolat has consequently advocated a “Made with Europe” approach. Speaking in Brussels on October 13, he said Ankara shared European concerns about large third-country imports, but argued that the solution should not exclude trusted partners or customs-union members. The Turkish Ministry of Trade said Bolat pressed officials to recognize the depth of integrated automotive supply chains.
The Franco-German compromise complicates that campaign. According to Reuters, Paris and Berlin proposed allowing European partners that participated in the EU single market on January 1, 2020, to opt into the automotive preference, subject to full reciprocity and alignment with EU investment and trade-defense measures. That formulation creates a pathway for Britain, Norway and Iceland, but not Türkiye, Japan or South Korea.
France and Germany cannot decide the final law alone. Their position still requires support from other member states and the European Parliament. Nevertheless, an agreement between the EU’s two largest industrial economies carries substantial negotiating weight and signals that the final eligibility test may be narrower than the Commission’s original customs-union language.
The investment risk may exceed the near-term trade loss
The most consequential effect could be on future capital allocation rather than current exports. If vehicles assembled in Türkiye cannot qualify for EU-funded demand, multinational manufacturers deciding where to place their next electric model, battery line or final-assembly investment may favor an EU location.
That would produce an uneven outcome across Türkiye’s automotive value chain. Turkish components might remain attractive for vehicles assembled inside the EU because they could count toward qualifying-origin thresholds. Final assembly, with its deeper employment, engineering and supplier spillovers, would face greater relocation pressure. Türkiye could retain a role as a parts platform while losing higher-value production mandates.
The issue therefore changes the calculation for both foreign investors entering Türkiye and established manufacturers expanding there. Site-selection models will have to distinguish between unrestricted private sales, government procurement, fleet incentives and subsidized purchases in each target market. Market-entry analysis based only on tariff-free customs-union access would no longer be sufficient.
Investors will also need product-level origin mapping. Bills of materials must identify the non-preferential origin and value of batteries, power electronics, aluminium, steel and other components. Import-export planning must account for the possibility that the same Turkish part qualifies when incorporated into an EU-assembled vehicle, while a finished Turkish vehicle does not.
This regulatory shift arrives as Türkiye is recovering some investment momentum. The Presidential Investment Office reported that the country attracted $13.1 billion in foreign direct investment in 2025, up 12.2 percent from 2024, with manufacturing receiving $3.02 billion. European countries remained prominent among the leading sources. Uncertainty over EU-supported demand could affect whether that capital goes into export-oriented final production, intermediate inputs or domestic-market capacity.
The implications also extend beyond cars. Low-carbon and origin requirements covering aluminium, cement, renewable-energy equipment, batteries and other strategic goods could influence factory configuration and certification. Meanwhile, the Industrial Accelerator Act would impose conditions on certain investments above €100 million in industries where an investor’s home country controls more than 40 percent of global manufacturing capacity. The European Parliament’s co-rapporteurs have proposed lowering that threshold to €50 million, according to the European Parliamentary Research Service.
Diplomacy, reciprocity and corporate restructuring
Ankara’s strongest argument is economic integration. Türkiye is the EU’s fifth-largest goods trading partner, its largest external vehicle supplier by value, and an important market for European manufacturers. The European Automobile Manufacturers’ Association reported that EU vehicle exports to Türkiye increased 24.8 percent to €18.8 billion in 2025, making Türkiye the bloc’s third-largest vehicle export market.
That mutual dependence gives Türkiye leverage, but it also points to the likely price of inclusion. Brussels may seek greater access for European companies to Turkish public procurement, stronger reciprocity, alignment with EU trade-defense measures and safeguards against third-country goods entering through Türkiye. Such concessions would require domestic legal changes and could expose Turkish public contracts to additional European competition.
Government relations will therefore become part of investment strategy, not merely diplomacy. Companies need to track negotiations among the Commission, Parliament, member states and Ankara, while assessing whether sector-specific exemptions or equivalence decisions remain possible.
Some manufacturers may consider dual structures, retaining component production in Türkiye while locating final assembly or qualifying activities inside the EU. That approach introduces incorporation, tax, transfer-pricing, customs, employment and intellectual-property questions. It also demands project management across jurisdictions and careful use of available Turkish investment incentives without assuming that a Turkish subsidy resolves eligibility under an EU program.
What This Means for Foreign Investors
Foreign investors should treat the “Made in Europe” negotiations as a change in market architecture, not as an immediate closure of the EU market. The first step is to separate current legal access from future eligibility for public procurement, consumer support, corporate-fleet incentives and renewable-energy programs.
For an investment in Türkiye, market-entry work should test revenues under several outcomes: full Turkish equivalence, recognition of Turkish components but not final assembly, and broader exclusion from supported demand. Import-export planning should map origin and documentation at component level, while legal and tax compliance reviews should examine how alternative EU assembly, licensing or joint-venture structures would affect customs treatment and profitability.
Investment-incentive analysis must compare Turkish support with the value of EU demand-side benefits that a product might lose. Government-relations engagement should follow both Ankara’s reciprocity negotiations and the EU legislative process. Company incorporation and corporate structuring may become relevant if an EU production or distribution entity is needed, while project management will be essential where manufacturers divide component production, final assembly and certification across borders.
The eventual rules are still unsettled. What is already clear is that tariff-free access alone will no longer determine competitiveness. For investors using Türkiye as a manufacturing bridge to Europe, location, origin, assembly, carbon intensity and access to publicly financed demand must now be evaluated as one integrated decision.