Honda weighs a European return as Made in EU rules loom

Honda could resume building cars in Europe, either alone using another automaker’s factory, if the EU’s proposed ‘Made in EU’ rules are finalised and are, as expected, in favour of locally assembled vehicles. The automaker had previously exited Europe in 2021 using the reverse logic: a trade deal that allowed it to serve the region tariff-free from Japan. 

Speaking at the EICMA motorcycle show in Milan, Hans De Jaeger, President of Honda Motor Europe, said that the company has “certainly no intention to leave Europe”. He stressed that no concrete plan for local production or a manufacturing partnership is currently on the table, and maintained optimism that the final legislation would recognise Japan as a trusted partner given the scale of Japanese investment in the region.

The European Commission’s Industrial Accelerator Act would reserve some public procurement and support for vehicles meeting local assembly and stringent European-content thresholds, as part of a wider push to reduce, in large part, dependency on China.intensifying Chinese competition. The proposal still needs approval from the European Parliament and member states. For Honda, which closed its Swindon plant in July 2021 and ended Turkish car production the same year, it raises the prospect of exclusion from incentives its rivals can access.

Swindon’s closure followed years of underuse, with the plant running at around 60% of capacity after the 2008 financial crisis, and a decision to concentrate (now largely written-down) electric vehicle investments in Asia and North America. Brexit has also an apparent driving factor. Meanwhile, the EU-Japan Economic Partnership Agreement, which phased out tariffs on Japanese-built cars, removed much of the case for a high-cost European base. Local-content rules now threaten to reinstate that case via another route, since a zero tariff counts for little if imported vehicles are shut out of subsidies and procurement.

Volume remains the biggest obstacle. Honda registered just shy of 59,000 cars across Europe during the first nine months of 2026, which De Jaeger said is too few to justify a factory. However, higher sales from its next-generation battery-electric and hybrid line-up, including the 0 Series, could change the calculation. Contract manufacturing or co-production with a partner would allow Honda to meet assembly thresholds without committing billions to a single-brand plant.

The position fits De Jaeger’s broader critique of EU policy. He has argued that a lack of consistency in the Commission’s approach to decarbonisation is making life “extremely difficult” for automakers. He has also pushed for flexibility over a blanket electrification mandate, even if it comes at the price of stricter CO2 targets. Brussels is now loosening its grip on powertrains, with German Chancellor Friedrich Merz declaring the internal combustion engine ban history after a deal with France, while tightening it on where cars are built.

EU industrial policy is shifting the basis of competition from tariffs to geography. Japanese brands that relied on the trade agreement to serve Europe from home now face the same localisation pressure as their Chinese rivals, and Honda’s openness to a shared plant signals that low-volume importers may instead turn to contract assembly rather than return with factories of their own.