France and Germany reach deal on future of car industry
- France and Germany agreed to a provisional deal on the future of the automotive industry.
- The agreement sets a 90% CO2 reduction target for new vehicles by 2035.
- Vehicles running on renewable fuels will be classified as zero-emission.
- The Made in Europe definition now includes the EU 27 with an opt-in for Britain and Norway.
- The pact is currently awaiting final sign-off from the German government.
France and Germany reached a provisional agreement on the future of the automotive industry on Thursday, 15 October 2026, during a European summit. The deal, which aims to ease European Union car emission rules, was finalised on the sidelines of the summit by the two neighbouring countries. This development follows recent efforts by the two nations to coordinate on other joint projects, including a tank programme and an offer to build submarines for Argentina.
New 90 percent CO2 reduction target for 2035
The agreement sets a 90 percent reduction target for carbon dioxide emissions from new vehicles by 2035. This replaces the European Commission's original proposal, which had planned a complete ban on new petrol and diesel vehicle sales by that year. The new pact eliminates the requirement for manufacturers to compensate for the remaining 10 percent of residual emissions through credits such as the use of low-carbon steel. This change is attributed to the growing use of fuels. The agreement includes a reduction in overall EU emission rules for vehicles.
Renewable fuels classified as zero-emission
Vehicles that run on renewable fuels will be classified as zero-emission under the new agreement. The deal also expands super credits to all vehicle sizes, removing the original restriction to small, affordable electric cars. These measures are intended to make it easier for automakers to meet their carbon dioxide targets.
Redefining the Made in Europe trade scheme
The definition of Made in Europe is restricted to the 27 European Union member states, with an opt-in available for countries like Britain and Norway under specific conditions. This is narrower than the definition proposed by the Commission in March, which potentially included dozens of partner countries that have existing trade deals with the EU. Germany is the most populous member state of the European Union with over 83 million people. Previously, Germany had advocated for a Made with Europe approach that encompassed many countries, but it accepted these stricter criteria to focus on close partners and internal manufacturing. The principle of European preference requires companies in strategic sectors receiving public funds to source components from within the European Union or certain partner countries. European carmakers had specifically requested the inclusion of Britain in this scheme, citing the existence of deeply integrated supply chains. Reports confirmed that Britain will be included in the definition of vehicles considered made in Europe under these measures.
Competing national priorities in negotiations
Germany advocated for less strict carbon emission targets and a wider definition of made in Europe to encompass key non-EU trade partners. France pushed to uphold the climate ambitions of the European Union and maintain the made in Europe public procurement scheme as its own purview. The final agreement aims to preserve the European automotive industry with lower environmental ambition but a strengthened policy on European preference. Paris also validated additional flexibilities for hybrid vehicles in 2035, a measure requested by Berlin to support its automotive industry.
British government welcomes potential inclusion
The office of Prime Minister Andy Burnham stated that the inclusion of the UK in the new EU car policy would be good news for the British automotive industry, as well as the jobs and investment it supports. Reports indicated that France and Germany plan to include the UK in these rules. The agreement would allow the UK to join the policy if it aligns on tariffs regarding China. This follows earlier calls from the Volkswagen chief for France and Germany to cooperate on a strategy to counter Chinese vehicle competition.
Provisional agreement awaits final sign-off
The agreement reached on Thursday is a provisional measure that awaits a final sign-off from Berlin. It is expected to allow the European Union to advance its automotive package and related legislation on European preference. These measures are currently being negotiated between the 27 member states and the European Parliament.
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