France and Germany Reach Agreement on EU Auto Policy, 2035 ICE Ban Effectively Loosened
nashnova research
France and Germany on Friday abandoned the 2035 full phase-out target for combustion-engine cars and locked 'Made in Europe' subsidies to EU and UK production — a signal that Europe's rigid climate legislation is bending to industrial reality.
What exactly changed about the 2035 ban?
The original plan required new-car CO₂ emissions to fall 90% from 2021 levels by 2035, with the remaining 10% offset through low-carbon materials. The Franco-German deal scraps that 10% offset requirement too.
This means → automakers no longer pay for the last sliver of abatement. The entire reduction curve has effectively flattened.
Germany also secured two concessions: looser rules for plug-in hybrids, and corporate fleet emission targets downgraded from binding to "indicative" — in plain terms = a hard mandate became a soft recommendation.
Who gets inside the 'Made in Europe' subsidy circle?
Public subsidies and procurement contracts are restricted to cars produced in the EU, the UK, and EEA members that accept EU tariff and foreign-subsidy scrutiny.
Japan, South Korea, and Turkey are shut out.
This means → subsidies are no longer awarded by technology origin but by factory location — if your plant is inside the circle, you get the money.
Why is the UK caught in a bind?
The UK wants into the "Made in Europe" framework for subsidy access, but joining would mean aligning with the EU on China tariffs.
The Élysée put it bluntly: to benefit from public funds, a partner effectively needs to be inside the single market.
This reflects a deeper tension: post-Brexit Britain wants to stay close to the EU and avoid provoking Beijing — and it cannot easily do both.
EV sales are strong — so why loosen the rules?
EU electric-vehicle sales are up 45% year-on-year this year, capturing 22% of the new-car market — the numbers are not weak.
Yet France and Germany still chose to ease up. This reflects real pressure on carmakers: heavy investment, rapid transition, thin margins — a rigid compliance timeline amplifies financial risk.
Renault CEO François Provost put it plainly: "We have invested heavily in EVs… regulation must be pragmatic."
How far can this deal go?
France and Germany are the EU's two largest members. The deal lays the groundwork for EU-level auto legislation talks; all three major European Parliament blocs are represented in both governments.
But the agreement does not cover steel, cement, or green technology — "Made in Europe" rules for those sectors are still being negotiated under the Industrial Acceleration Act.
In plain terms = the auto chapter is settled for now, but the larger industrial-protectionism puzzle is far from complete.
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