France and Germany reach agreement on the future of the car industry

France and Germany have reached a provisional agreement on the future of the European automotive industry, according to diplomatic sources. The deal was struck during a European summit on Thursday, October 15, and aims to safeguard the sector while advancing the EU's broader automotive package and legislation on European preference. This includes rules requiring companies receiving public funds to source components made within the EU or certain close partner countries. The agreement allows for additional flexibility regarding carbon emissions from vehicles by 2035, which Germany had requested to protect its powerful automotive industry. According to a document obtained by AFP, manufacturers will need to reduce their CO2 emissions by 90 percent by 2035, but will not be required to compensate for the remaining 10 percent, unlike an initial proposal by the European Commission. This concession is justified by the increasing use of renewable fuels such as biofuels. In exchange, Germany has accepted a stricter definition of European preference, which would require companies benefiting from public funds to source components produced within the EU or specific partner nations. This principle, proposed by Brussels, aims to ensure strategic sectors rely on locally manufactured parts. Germany had previously advocated for a broader "Made with Europe" approach encompassing many countries, but has ultimately agreed to more stringent criteria focused on the EU and closer partners. The agreement also seeks to relax a proposal from Brussels aimed at electrifying corporate fleets by allowing the inclusion of low-emission internal combustion engine vehicles. Additionally, a mechanism known as "supercredits," originally reserved for smaller, cheaper electric vehicles to encourage their development, will be extended to larger electric cars. Germany and France consider this set of measures as a balanced approach, combining ambitious decarbonization goals with recognition of market realities. They urge the rapid and simultaneous adoption of these texts within European institutions. The European Automobile Manufacturers Association (ACEA) has called for accelerated negotiations on this automotive package, hoping for adoption by early 2027. Environmental organizations regularly criticize the concessions made to the industry at the expense of ecological concerns. The agreement confirms the European decision to abandon the goal of transitioning to fully electric vehicles by 2035, disappointing environmental groups. According to a French-German document reviewed by AFP, manufacturers will need to reduce their CO2 emissions by 90 percent by 2035, without compensating for the remaining 10 percent, contrary to an initial proposal by the European Commission. This concession is justified by the increasing use of renewable fuels such as biofuels. In return, Germany accepts a stricter definition of European preference, which would require companies receiving public funds to source components produced in Europe or certain partner countries. This logic of "Made in Europe," a form of protectionism, would apply to production within the 27 EU member states and select partners such as the United Kingdom, Norway, or Switzerland. It aims to resist the influx of Chinese vehicles into Europe. Germany had long defended a "Made with Europe" approach expanded to many countries but has finally accepted stricter criteria focusing on the EU and close partners. This agreement should allow the European Union to advance on its "automotive package" and legislation on European preference, currently being negotiated among the 27 EU members and the European Parliament. To achieve this, Paris has validated additional flexibility for thermal vehicles requested by Berlin to preserve its powerful automotive industry. The "Made in Europe" concept provides a structural response to the "Chinese shock" in the automotive sector, according to Neil Makaroff, a specialist in ecological transition at the think tank Strategic Perspectives. However, relaxing strict emission standards for cars could be counterproductive or even fatal for the European industry, he argues, especially as the race to electrification intensifies. Germany and France consider this set of measures as a balanced approach, combining an ambitious European decarbonization trajectory with consideration of the realities of the automotive market. Finally, both countries advocate for these European texts to be adopted as quickly as possible and simultaneously within European institutions. The ACEA, the European carmakers' lobby, had called on Wednesday for accelerated negotiations on this European automotive package, hoping for adoption beginning in early 2027. Environmental organizations regularly criticize the concessions made to the industry at the expense of ecology.