France, Germany strike deal on car emissions and UK special status
XLY•France and Germany proposed setting the EU’s 2035 car CO2 target at 90% of 2021 levels without additional compensatory measures, while allowing Britain into the bloc’s “Made in EU” rules subject to conditions. The plan needs backing from other EU members and the European Parliament.
1. Emissions proposal
The Franco-German plan would set the 2035 target at a 90% reduction in car CO2 emissions from 2021 levels, without requiring additional compensatory measures. It also proposes multi-year compliance periods, no revision before 2030 of the utility factor for hybrid vehicles, and recognition of cars using renewable and low-carbon fuels as zero-emission vehicles.
2. Britain’s potential inclusion
For automotive products, the plan says “Made in EU” should cover the EU’s 27 countries and other European partners that were part of the EU internal market on January 1, 2020, which would include Britain. Inclusion would require full reciprocity and alignment with EU conditions on investment from third countries and trade protection measures. France and Germany still need support from other EU members and the European Parliament; a final common text is unlikely before early next year.
3. Industry reactions
European automotive stocks rose after the deal was announced, with the STOXX 600 Automobile and Parts Index gaining nearly 2%. German Chancellor Friedrich Merz called it “a good day for motorists and for jobs in Germany, France and Europe,” while environmental groups criticised the proposals.
