France, Germany link softer 2035 car rules to Made in EU

France and Germany announced on Friday, October 16, that they had agreed on "a joint approach to securing the future of the European automotive industry." The pact pairs a softer 2035 emissions target with stricter "Made in Europe" rules for vehicles, according to the joint press statement published by the Élysée.elysee.fr

The deal settles months of disagreement between the EU's two largest economies. It is also expected to shape EU car policy as Chinese automakers expand in Europe. "Our shared ambition is clear: to successfully transform our automotive industry while maintaining our climate ambition and ensuring that the cars of the future are produced in Europe," the statement said.elysee.fr

A trade-off between Paris and Berlin

The two governments propose "an ambitious European decarbonisation pathway with the regulatory flexibility needed to reflect different market realities and technological conditions." The package also includes incentives for investment, research, European production and resilient supply chains, according to the statement.elysee.fr

In practice, Germany accepted stricter local-content rules for cars under the proposed Industrial Accelerator Act, which France had long sought. In return, France backed Berlin's push to relax the planned phase-out of combustion engines, POLITICO reported. The European Commission had proposed that carmakers cut CO2 emissions 90% from 2021 levels by 2035 and offset the remaining 10%. The Franco-German plan keeps the 90% target but drops the offset requirement, Reuters reported.politico.eu+1

For cars, "Made in EU" would cover the 27 member states plus European partners that were in the internal market on January 1, 2020, which includes Britain. Those partners would have to accept full reciprocity and align with EU trade protection measures, such as the bloc's restrictions on Chinese-built electric vehicles, according to Reuters. Euronews reported that 70% of car components, not counting batteries, would have to be made in Europe, along with 10% of battery content.reuters.com+1

Reactions split

German Chancellor Friedrich Merz called the deal "a good day for motorists and for jobs in Germany, France and Europe," Reuters reported. European auto stocks rose after the announcement, lifting the STOXX Europe 600 Automobiles and Parts Index. The European auto suppliers' association CLEPA said it supports the joint position.reuters.com+1

Not everyone agreed. Toyota's European division argued that including trusted partners such as Japan, South Korea and Turkey would give the EU the scale it needs to compete with China. Anna Krajinska of the campaign group T&E called the deal a "historic mistake," according to Reuters.reuters.com

Next steps in Brussels

The deal was held up for a day by divisions within Germany's governing coalition. It went ahead once the Social Democrats dropped their opposition, POLITICO reported. Paris and Berlin still need to win over other EU members and the European Parliament, and a final text is unlikely before early next year, Reuters noted.politico.eu+1

"We hope that this Franco-German dynamic can swiftly lead to an agreement with our partners, for our jobs and our industry," French President Emmanuel Macron wrote, POLITICO reported.politico.eu