France and Germany strike deal to boost Europe’s struggling car industry

The deal between Europe’s two economic powerhouses aims to cut carbon emissions and support the development and manufacture of electric cars in Europe, according to a joint statement released on Friday.

“Our shared ambition is clear: to successfully transform our automotive industry while maintaining our climate ambition and ensuring that the cars of the future are produced in Europe,” officials stated together.

Additional incentives are being offered for investment, research and development, European production, and robust supply chains.

The agreement awaits ratification from other EU member states and the European Parliament before becoming law, though analysts expect it to shape continental policy moving forward.

European car manufacturers have been finding it difficult to compete against Chinese rivals, which are increasingly targeting Europe amid export barriers and weaker domestic demand.

According to Schmidt Automotive Research, Chinese electric vehicles and hybrids comprised 10.7 percent of the European market in the second quarter of 2026, up from 5.7 percent a year earlier.

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Franco‑German dynamic

Paris and Berlin had long disagreed over how Europe should rebuild its struggling auto sector.

Germany prioritized less stringent carbon‑emission standards for manufacturers and broadened the “made in Europe” definition to encompass key non‑EU trading partners such as Norway and the United Kingdom.

France contended for preserving the bloc’s climate objectives and keeping the “made in Europe” public‑procurement scheme within the jurisdiction of EU member states.

Leaders from both nations expressed strong support for the arrangement.

French President Emmanuel Macron highlighted that the deal demonstrates a clear intention to successfully transform the European automotive industry while safeguarding climate goals.

He noted on X that “we hope this Franco‑German cooperation will lead to a swift agreement with our partners, for the benefit of our jobs and industry.”

German Chancellor Friedrich Merz called the arrangement a “good day for car drivers and for jobs across Germany, France and Europe.”

“This signals a pro‑investment message to the industry,” he added via a tweet on X.

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Softened emissions targets

The European Commission proposed last year that CO₂ emissions from cars should fall by 90 percent from 2021 levels by 2035, requiring manufacturers to achieve a full 100 percent reduction by adopting low‑carbon steel and alternative fuels.

Under the Franco‑German agreement, the benchmark drops to 90 percent without necessitating the same corrective actions.

This adjusted target aligns closely with the preferences of German automakers.

The deal also permits vehicles powered by renewable fuels to qualify as “zero‑emission,” simplifying manufacturers’ path to meeting emission ceilings.

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‘Good news’ for the UK

Within the tentative framework, the provisional plan proposes that the “Made in EU” designation extend to the EU’s thirty‑seven current members plus other European partners that were part of the internal market established on 1 January 2020 – a status shared jointly by the United Kingdom, which formally exited the single market on 31 January 2020.

An official at the UK Prime Minister Andrew Burnham’s residence welcomed what could be beneficial for the nation’s automotive sector, while emphasizing that EU-wide consensus remains essential and detailed terms are still pending.

The proposal further stipulates that inclusion depends on mutual reciprocity agreements and dynamic alignment with EU investment‑limit measures and trade protection frameworks from third countries.

Such arrangements might require the UK to adopt EU‑level restrictions on imports of Chinese‑built hybrid and battery electric vehicles.

(with wired)

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