France and Germany Strike Deal to Soften EU 2035 Car Rules in Exchange for Made in Europe Push

France and Germany on Friday agreed a joint position that would loosen the European Union's planned 2035 phase-out of new petrol and diesel cars, in exchange for stricter rules that favour vehicles and components made in Europe. The deal was struck on the sidelines of the EU leaders' summit in Brussels and is designed to shape negotiations that are still under way in the European Parliament and among member states.

What changes on emissions

Under the EU's existing law, new cars and vans must achieve a 100% cut in fleet-average CO2 emissions from 2035, which in practice ends sales of new conventional combustion-engine models. In December 2025 the European Commission proposed lowering that to 90%, with conditions on how the remaining 10% could be covered.

The Franco-German position goes further. Carmakers would need to reduce fleet-average emissions by 90% by 2035, and would not have to offset the remaining 10% at all. That leaves meaningful room for hybrids and some combustion-engine models to stay on sale after 2035, which German manufacturers such as Volkswagen, BMW and Mercedes-Benz have been lobbying for. Chancellor Friedrich Merz said the 90% figure makes the target realistic. Environmental groups have criticised the arrangement as a loophole.

What France got in return

Paris has championed a strict European preference in public procurement and state funding to protect its industry from Chinese competition. Under the deal, at least 70% of a car's components, excluding batteries, would need to be produced in Europe, and 10% of battery content would have to come from European sources, for a vehicle to qualify for support.

Germany had wanted a broader definition that included trusted non-EU partners, and it largely won that point. Norway, Iceland, Switzerland and the United Kingdom could have their products counted as made in Europe, provided they sign agreements guaranteeing EU companies fair access to their own public contracts and funding, and ensure they are not used as a backdoor by third countries.

Not yet law

The agreement is a joint national position, not a final EU decision. Other member states and MEPs will now decide whether to back it, with a plenary vote on the Commission's proposal scheduled for 23 November in Strasbourg. Merz may also face resistance at home: Germany's Social Democratic environment minister has argued for a 95% target, with the remaining 5% offset through low-carbon steel. President Emmanuel Macron said he hoped the Franco-German momentum would lead quickly to a wider agreement.

Why it matters beyond Europe

The UK clause is significant for Tata Motors, whose Jaguar Land Rover unit builds most of its vehicles in Britain and sells heavily into the EU. Being treated as a trusted partner would keep UK-built cars eligible for European incentives. For Indian auto-component exporters that supply European carmakers, the 70% local-content threshold is a reminder that access to subsidy-linked programmes could increasingly depend on where parts are made, a factor likely to shape investment decisions as the rules are finalised.

The deal also marks a broader shift in EU climate policy toward flexibility for industry, as Europe tries to balance its emissions goals against weak electric-vehicle demand and pressure from Chinese competitors.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.