Chancellor Friedrich Merz and President Emmanuel Macron have ended a long standoff over cars. In Brussels on Thursday, the two leaders settled on a package that gives Berlin a softer 2035 engine rule and gives Paris a tougher "Made in Europe" test for anything the state pays for.
The terms are laid out in a German-French paper dated 15 October, seen by German media. Today the law says new cars must emit nothing from the tailpipe in 2035. The paper would replace that with a 90% cut in fleet emissions against 2021.
The European Commission had already floated the 90% figure at the end of 2025. But it attached conditions: carmakers had to offset the remaining 10% with green steel, and combustion cars had to run on renewable fuels. The Franco-German paper drops both. It also turns the Commission's electrification quotas for company fleets into a non-binding goal. Reports on the detail add more flexibility on timing and a friendlier carbon count for plug-in hybrids.
In return, Germany moves toward the French line on industrial policy. Purchase incentives and public procurement would favour cars built in Europe, and a growing share of batteries and key components would have to be made on the continent. British-built cars would count as European only if London aligns its trade protection against China with the EU's.
The timing is deliberate. The EU has put a cap of 350,000 Chinese hybrid cars a year on the table, which Beijing has not yet confirmed, and Berlin is pushing for similar quotas in other sectors. A car rulebook that rewards European production fits that wider shift.
Merz still has work to do at home. Environment Minister Carsten Schneider, of the Social Democrats, has already written to the chancellor setting a red line on climate targets, and his party must approve the deal. That is awkward in a week when the coalition is feuding after SPD co-leader Bärbel Bas resigned. In the Council, other governments will want their say before anything becomes law.
The German-French veto standoff was the main obstacle to rewriting the 2035 rule, and it is now gone. Carmakers can read the 90% target as a licence to keep selling petrol and diesel hybrids after 2035, without the green-steel and fuel conditions the Commission wanted. The price is a rulebook that favours European-built cars and batteries, which will raise costs for any maker leaning on Chinese supply. The deal also shows that Berlin and Paris can still bargain when it counts, even as their joint fighter jet project has collapsed and the Mercosur trade deal divides them. Whether it survives the SPD and the Council is the real test.
