Germany and France have agreed on a provisional plan to support the European automotive sector, easing emissions rules and expanding the definition of 'Made in Europe' to include Britain.
Germany and France have reached a provisional agreement to support Europe's struggling automotive industry. The two countries announced the deal in a joint statement on Friday, aiming to safeguard the sector while encouraging development and research. European car makers have faced significant challenges competing with Chinese electric vehicle companies, leading to cost-cutting measures across the continent.
The agreement addresses the European Union's emissions regulations for cars. According to a draft document reviewed by France 24, the two nations backed a scaling down of EU emission rules. The European Commission had previously proposed that the ban on sales of new petrol and diesel vehicles in 2035 be scrapped in favor of a requirement for manufacturers to cut new vehicle exhaust emissions by 90 percent.
Under the previous proposal, the remaining 10 percent of emissions would have had to be compensated for through credits, such as using low-carbon steel. The Franco-German deal scraps this compensation requirement. "Residual emissions should not have to be compensated by manufacturers," the draft states, according to France 24. The plan also allows cars running on renewable fuels to count as "zero-emission" and extends "super credits" for small electric cars to all vehicles "irrespective of their size or length."
Mezha reports that the provisional plan sets the target at a 90% cut from 2021 levels by 2035, without further compensatory measures. This aligns with the wishes of German carmakers, who had pushed for less stringent targets. However, the target remains contentious within Germany; the Social Democrats’ environment minister has suggested a target of 95%, with a further five-percentage-point reduction offset through low-carbon steel.
A key component of the deal involves the definition of "Made in Europe" for public procurement and industrial measures. The agreement restricts the application to the EU's 27 countries but includes an opt-in for other European partners, notably Britain and Norway, under certain conditions. This is a narrower definition than the one proposed by the European Commission in March, which could have included dozens of partner countries.
The inclusion of Britain depends on an agreement on "full reciprocity," as well as "dynamic alignment with EU conditions for investment from third countries and with EU trade protection measures," according to Mezha. This could require Britain to adopt EU measures to limit imports of Chinese-built hybrid and battery electric vehicles.
The office of British Prime Minister Andy Burnham welcomed the move, stating that if confirmed, it "would be good news for the British automotive industry and the jobs and investment it supports across the UK."
The agreement was reached on the sidelines of the European Council on Thursday, October 15, 2026. German Finance Minister Lars Klingbeil confirmed on Friday that the two countries were in the final stages of reaching an agreement. He noted that improving conditions for carmakers must come with clear commitments to investment in production sites and to workers, though talks on those specific commitments were still ongoing.
Premier of the state of Lower Saxony, Olaf Lies, hailed the agreement as a "strong signal" in support of Europe's car industry that protects jobs in the sector. Lower Saxony is home to Volkswagen's headquarters in Wolfsburg, and Lies serves on VW's supervisory board.
The deal still requires approval from the Social Democratic Party (SPD), a member of Germany’s governing coalition, as well as other EU member states and the European Parliament to take effect.
The provisional deal represents a significant shift in EU industrial policy, balancing climate goals with the economic pressures facing traditional automakers. By easing emissions compliance costs and expanding the "Made in Europe" label to include Britain, the agreement aims to strengthen the European supply chain against competition from China. However, the need for further approval from the German coalition government and the broader EU institutions means the final policy remains uncertain.
Sources
This article was drafted with AI assistance and checked against the sources above. Company claims are reported as claims. Cover image is AI-generated.
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