France and Germany have reached a provisional agreement to soften the European Union’s planned car emissions requirements for 2035 and potentially give British automakers access to the bloc’s proposed “Made in Europe” framework. The agreement, reported by Reuters on 15 October 2026, brings together two contentious issues for Europe’s automotive industry: how quickly manufacturers must reduce vehicle emissions and which countries should qualify for industrial support.
The proposed changes would give carmakers more flexibility in meeting the EU’s climate requirements while opening the door for the United Kingdom to be treated as a participating European partner in certain automotive measures. However, the arrangement is not yet law. It still requires support from other EU member states and the European Parliament, and some details remain under negotiation.
The emissions issue centres on the EU’s planned 2035 target for new cars. The European Commission had proposed reducing average carbon dioxide emissions from new vehicles by 90% compared with 2021 levels. Manufacturers would then need to address the remaining 10% through measures such as using low-carbon steel and alternative fuels.
Under the Franco-German proposal, the emissions reduction target would remain at 90%, but manufacturers would no longer have to take additional compensatory measures to close the remaining gap to 100%. The change would therefore reduce the requirements attached to the original proposal and give manufacturers greater flexibility in how they manage their vehicle fleets after 2035.
The distinction is important. The proposal would not eliminate the 90% reduction target, but it would remove the requirement to compensate for the remaining emissions through the specified low-carbon materials and fuels. It could also give manufacturers more room to continue selling some vehicles with combustion engines and plug-in hybrid systems, depending on the final rules.
Germany’s automotive industry has sought greater flexibility as manufacturers face the cost of transitioning to electric vehicles, competition from Chinese producers and uncertainty over consumer demand. German carmakers have argued that the transition needs to account for industrial competitiveness, employment and the financial pressures facing manufacturers and suppliers.
France has also sought to protect its automotive industry, although it has traditionally placed greater emphasis on ensuring that European industrial support strengthens production within the bloc. The agreement reflects an effort by both governments to reconcile these priorities while negotiating a broader framework for European manufacturing.
The second major element concerns the proposed “Made in Europe” rules. The EU is developing measures that would introduce local-content and low-carbon requirements for products purchased through public procurement, public auctions or subsidy programmes. Such requirements could influence which manufacturers qualify for public contracts and government-backed financial support.
France has supported limiting these benefits to products manufactured within the EU’s 27 member states. Germany and other countries have argued that the rules should also recognise closely connected European partners whose manufacturers and suppliers are integrated into EU industrial supply chains.
The provisional agreement would allow the automotive sector’s definition of “Made in Europe” to include the EU’s member states and other European partners that were part of the EU internal market on 1 January 2020. This wording would create a route for the United Kingdom to qualify, even though Britain left the EU single market at the end of 2020.
For British automakers, inclusion could help preserve access to industrial support and public procurement opportunities linked to the European market. The UK automotive industry remains closely connected to European supply chains, with vehicles and components crossing borders during production. Access to the proposed framework could therefore affect investment decisions, manufacturing relationships and the competitiveness of British factories.
A spokesperson from the office of UK Prime Minister Andy Burnham said inclusion would be good news for Britain’s automotive sector, while stressing that the proposal would require wider European agreement and that the details had not yet been fully examined.
The potential benefit, however, comes with conditions. The Franco-German proposal says British participation should depend on full reciprocity and alignment with EU requirements concerning investment from third countries and trade-protection measures.
In practice, this could require Britain to align more closely with the EU’s approach to imports of Chinese-built electric and hybrid vehicles. The EU has introduced measures to limit imports of Chinese-made electric vehicles, including additional tariffs, while the UK has maintained a different approach to trade policy.
That creates a difficult policy choice for Britain. Access to the proposed “Made in Europe” framework could support domestic carmakers by allowing them to qualify for certain European industrial measures. But alignment with EU trade restrictions could reduce the UK’s freedom to set its own approach to imports and could affect its wider economic relationship with China.
The question is especially relevant as governments seek to attract investment in electric vehicle production, batteries and automotive supply chains. Manufacturers must decide where to build vehicles and components, while governments use subsidies, procurement rules and trade measures to influence those decisions.
The emissions proposal also comes amid wider uncertainty about the pace of Europe’s transition to electric vehicles. Manufacturers have invested heavily in electrification, but the industry continues to face challenges involving production costs, charging infrastructure, battery supply chains and consumer purchasing decisions. Different countries and companies have called for different levels of flexibility in the transition.
Germany’s environment minister has suggested that a 95% emissions reduction target could be considered, with the remaining five percentage points addressed through low-carbon steel. That position illustrates that discussions over the final emissions framework are not settled even within Germany, one of the two governments supporting the compromise.
The potential consequences extend beyond individual vehicle manufacturers. Car production supports networks of component suppliers, engineering firms, dealerships and logistics businesses. Changes to emissions requirements can influence factory investment, workforce planning and the technologies that suppliers are expected to develop. Meanwhile, changes to “Made in Europe” eligibility could affect where companies source materials and manufacture vehicles if access to public support depends on local production.
From a climate perspective, the central issue is how much flexibility the EU can offer its automotive industry while maintaining a credible path to lower transport emissions. Road transport is a significant source of greenhouse gases, and reducing emissions from new vehicles is an important part of the bloc’s climate strategy. A less demanding framework could give manufacturers more options in the short term, but the overall effect on emissions would depend on which vehicles are sold, how their emissions are measured and what other measures accompany the policy.
The proposed deal therefore combines industrial policy with climate regulation. France and Germany are seeking a compromise that supports manufacturing and gives the UK a potential route into certain European industrial measures, while reducing some of the requirements attached to the EU’s planned 2035 car emissions framework.
Neither government can implement the changes across the EU on its own. Other member states and the European Parliament must still agree to the proposal before it can take effect. Negotiations may alter the final terms, including the emissions requirements, the conditions for British participation and the relationship between industrial support and trade policy.
For now, the agreement signals a possible change in the direction of EU automotive policy rather than a completed change in law. Its eventual impact will depend on whether the compromise secures wider approval and how manufacturers respond to the final rules.