France, Germany reach deal on future of car industry

France and Germany reached a provisional deal to reshape future EU rules for cars. Germany secured easier emissions compliance, while France secured a narrower definition of “made in Europe” for public procurement. The agreement matters because both countries strongly influence Europe’s auto policy and industry.

The deal removes a proposed requirement that carmakers compensate residual emissions after cutting new-vehicle exhaust emissions by 90%. It also allows renewable-fuel cars to count as “zero-emission” and extends “super credits” for affordable electric cars to vehicles of every size or length.

For sourcing, cars would generally need to use parts from the EU’s 27 countries. Britain and Norway could opt in under conditions. The agreement remains provisional, so Berlin must give final approval before these changes can shape EU policy.

Under the EU’s 2035 rule, sales of new petrol- and diesel-powered vehicles are due to be banned. The Commission proposed scrapping that ban and instead requiring manufacturers to reduce new-vehicle exhaust emissions by 90%. That would have preserved a major emissions target while changing how compliance worked.

The remaining 10% would have required compensation through credits, including credits linked to low-carbon steel. The Franco-German deal removes that compensation requirement. It also opens the door for vehicles using renewable fuels to be treated as “zero-emission,” making the target easier to meet.

The change would give automakers more flexibility than the Commission’s proposal. “Super credits” intended for small affordable electric cars would apply to all vehicles, regardless of size or length. The deal is provisional and awaits final sign-off from Berlin.

The article does not provide a figure for Europe’s car industry. A widely cited European Automobile Manufacturers’ Association estimate puts motor-vehicle manufacturing and related activities at roughly 13.8 million jobs across the European Union, though totals vary by definition and year. That indicates a sector large enough to affect employment, factories, suppliers, and exports.

Its importance goes beyond assembly plants. Carmakers support networks of parts producers, steelmakers, technology firms, dealers, and logistics companies. Rules that change vehicle costs or the origin of components can therefore influence investment decisions across many businesses. Public procurement can also steer demand toward regional manufacturing.

That context explains the political dispute. Germany sought easier emissions rules to help revive a struggling auto industry. France emphasized climate goals and EU-based procurement. The provisional deal could affect where companies invest and how quickly they adapt, but the article gives no precise forecast for jobs or economic growth.

The agreement changes the practical methods automakers can use to meet CO2 targets. Instead of compensating every remaining share of emissions after a 90% reduction, manufacturers would be allowed to leave residual emissions uncompensated. That removes a direct compliance obligation.

The deal also treats cars running on renewable fuels as potentially “zero-emission.” In addition, super credits originally proposed for small affordable electric cars would extend to all vehicles, irrespective of size or length. These credits could make a manufacturer’s overall target easier to reach across its fleet.

The Commission had suggested that credits could come from measures including the use of low-carbon steel. The Franco-German text scraps that latter compensation requirement. Together, the changes give carmakers more options and reduce the pressure created by the original proposal, although the agreement still requires final approval from Berlin.

Germany favored weaker emissions rules because it wanted to support a struggling automotive industry. Berlin argued for less stringent carbon targets and a broad “made in Europe” definition that could include important non-EU trade partners. Its position focused on industrial recovery and flexibility for manufacturers.

France took the opposite approach on climate policy. Paris wanted to preserve the EU’s climate ambitions rather than make compliance easier. It also wanted public procurement under the “made in Europe” scheme to remain mainly within the EU, rather than opening it broadly to partner countries.

The provisional deal splits the dispute. Germany won on emissions, because the compensation requirement was dropped and compliance became easier. France won on sourcing, because the car-related definition remains limited to the EU’s 27 countries, with only a conditional opt-in for selected partners such as Britain and Norway.

Including Britain matters because British and European car industries have deeply integrated supply chains. Parts and manufacturing can cross borders before a vehicle is completed. If British content qualifies as “made in Europe,” companies could face fewer barriers when seeking to meet sourcing requirements tied to public money.

The Commission proposed minimum thresholds for EU-made parts so public and foreign investment would support manufacturing inside the bloc. Its March plan could have included a dozen partner countries with equivalent access to public money. The Franco-German deal is narrower, but gives Britain an opt-in under certain conditions.

London welcomed the change, saying it could support British automotive jobs and investment. Britain is not included automatically: cars generally fall under the EU’s 27-country definition, with Britain and Norway among countries that may qualify. Final implementation depends on approval of the provisional agreement.

Vehicle exhaust emissions contribute to climate change mainly because burning petrol or diesel releases carbon dioxide, a heat-trapping greenhouse gas. More greenhouse gases in the atmosphere increase warming. The article focuses on new-vehicle exhaust emissions and the rules designed to reduce them.

Electric cars can avoid exhaust emissions because they do not burn petrol or diesel while driving. Renewable fuels can reduce reliance on fossil carbon, although the article only says the deal could allow such cars to count as “zero-emission.” Low-carbon steel can lower emissions from vehicle production rather than from the exhaust pipe.

The Commission’s proposal would have required a 90% cut in new-vehicle exhaust emissions, with the remaining 10% compensated through credits, including low-carbon steel. The deal removes that compensation requirement and broadens compliance options. It therefore loosens the policy mechanism, even though the climate issue remains central.