France and Germany have agreed on a common position on European car policy that would remove the sector’s 2035 climate-neutrality goal and allow new combustion-engine cars to remain on European roads beyond that year. The agreement was announced on October 16, 2026, and also calls for increased European vehicle production and more favorable treatment of renewable fuels.
The European Commission had proposed reducing CO₂ emissions from new cars by 90% in 2035 compared with 2021 levels, replacing an earlier phaseout goal for combustion engines. The remaining 10% would have been offset through measures including the use of low-carbon materials. France and Germany agreed to remove that offset requirement.
EU EV Sales Surge 45 per cent as Car Rules Ease
France and Germany weakened the 2035 framework while backing European production and more favourable rules for combustion alternatives.
The Commission’s proposed split remains the benchmark, but the deal removes offsets and abandons climate neutrality in 2035.
Germany secured more favorable rules for plug-in hybrid vehicles and indicative rather than binding national targets for corporate fleet emissions. France obtained German support for limiting public subsidies and contracts to cars made in the European Union, the UK and European Economic Area countries that align with EU tariffs and foreign-subsidy screening. The agreement also supports a program promoting small electric vehicles.
The terms could affect trade partners including Japan, Turkey and South Korea. An Élysée official said countries seeking access to the Made in Europe framework would effectively need to participate in the single market to qualify for public funding.
European electric vehicle sales have increased 45% this year and represent 22% of the EU new-car market, according to industry group Acea. Renault Chief Executive François Provost said the European automotive industry was not retreating from its EV ambitions, while arguing that regulation should be pragmatic.
The agreement could support negotiations on car policy among EU member states and the European Parliament. However, it does not resolve separate Made in Europe negotiations covering steel, cement, green technologies and other sectors under the proposed Industrial Accelerator Act.
Source: ft.com
