France and Germany have provisionally agreed to modify the European Union's 2035 car emissions regulations and bolster "Made in Europe" requirements for the automotive sector. This bilateral deal, brokered by German Chancellor Friedrich Merz and French President Emmanuel Macron, seeks to support the European car industry against international competition.

This agreement could significantly reshape the EU's climate policy for vehicles, offering more flexibility for major automotive manufacturers and potentially redefining trade relationships with countries like the United Kingdom. It impacts climate goals, industrial strategy, and consumer choices across Europe.

What the records show

The provisional agreement softens the EU's original 2035 CO2 reduction targets for vehicles. Internal combustion engine vehicles will be required to achieve a 90% fleet-average emissions reduction against 2021 levels by 2035. The deal eliminates the obligation to offset the remaining 10% of emissions, a previous requirement that would have effectively banned new combustion engine sales by 2035. Clean fuel technologies, such as renewable fuels, will count toward meeting this 90% emissions goal, and rules governing renewable fuels have been relaxed. German Chancellor Friedrich Merz stated that with this agreement, "the combustion engine ban is history".

France secured stricter "Made in Europe" requirements as part of the agreement, mandating that public contracts and purchase incentives for cars primarily benefit vehicles manufactured in Europe. The proposal also includes the United Kingdom in the "Made in Europe" scheme, conditional on the UK agreeing to full reciprocity and aligning with EU trade defense measures and investment screening. This includes adopting tariffs on Chinese electric vehicles. The draft agreement seen by The Guardian specifies that "'Made in Europe' should comprise the EU27 and an opt-in to further include European partners who were part of the EU single market as of 01/01/2020," referencing the UK and Norway.

What changed and for whom

This agreement marks a significant shift from previous EU climate ambitions. For the automotive industry, including companies like Volkswagen, Stellantis, and Renault, the deal offers increased flexibility and more time to adapt, easing regulatory pressure and compliance costs. The European Association of Automotive Suppliers welcomed the deal, recognizing that it addressed industry concerns. The agreement maintains the automotive sector's importance, which accounts for 13 million jobs and 7% of the bloc's gross domestic product.

For the United Kingdom, the proposal offers a pathway to participate in the "Made in Europe" public procurement rules, a goal for the British government. This participation depends on the UK adopting EU trade protection measures, particularly tariffs on Chinese electric vehicles. Environmental groups, such as T&E, have criticized the agreement, calling it a "historic mistake" that could slow the transition to electric vehicles and potentially harm Europe's auto sector. T&E's Anna Krajinska said "Germany and France are making a historic mistake".

What we could not confirm

We could not confirm the specific details of the remaining negotiations, particularly over 2030 carbon dioxide targets. The agreement remains provisional and requires broader approval from other EU governments and the European Parliament.