France and Germany Strike Deal to Weaken EU's 2035 Combustion Engine Phase-Out

France and Germany have reportedly reached an agreement to push for a softer version of the European Union’s planned ban on new combustion engine cars, potentially ending a months-long standoff between member states. According to business daily Handelsblatt and the Frankfurter Allgemeine Zeitung, the two governments are preparing to jointly demand changes that go further than what the European Commission has already proposed.

The arrangement is a trade-off. In return for French backing on car regulations, Germany will support Paris’s push for stringent “Buy European” provisions that would steer public subsidies and tenders toward EU-made goods. Chancellor Friedrich Merz and President Emmanuel Macron are expected to unveil the agreement before EU leaders gather in Brussels on 15 October. Until now, the two capitals had effectively cancelled each other out — Berlin sought looser rules for automakers but opposed Buy European requirements, while France took the opposite stance.

The shift could tip the balance. France had been part of a blocking minority alongside Sweden, Spain, Denmark, Luxembourg, the Netherlands and Portugal, resisting any dilution beyond the Commission’s proposal. With France changing sides, the reports suggest the necessary majority for a weaker target would likely materialise.

At the end of last year, the Commission had already responded to pressure from Germany, Italy and the car industry by proposing to lift the effective 2035 ban, cutting the new-car CO2 reduction target to 90 percent below 2021 levels rather than the original 100 percent. Under that framework, automakers could keep selling plug-in hybrids, range extenders and conventional cars after 2035 if they offset residual emissions using EU-made low-carbon steel, e-fuels or biofuels.

Citing EU diplomats, Handelsblatt reports the Franco-German deal would go even further — pushing the target down an additional ten percentage points to 80 percent, without requiring extra compensation. The two leaders have also reportedly agreed to extend the 2030 intermediate target timeline, giving carmakers five years to reach a 55 percent reduction against 2021 levels, instead of the Commission’s proposed three-year window from 2030 to 2032. Industry insiders told the newspaper this would spare manufacturers from substantial fines.

The 2035 phase-out was originally agreed in 2023 as a lever to curb stubbornly high transport emissions on the path to climate neutrality by 2050. Germany, home to Volkswagen, BMW and Mercedes-Benz, has lobbied intensively for flexibility, arguing its manufacturers need more breathing room as they contend with Chinese competition and US tariffs. Clean transport group Transport & Environment has cautioned that the Commission’s proposal alone would pull the battery-electric share of 2035 new car sales down to roughly 85 percent and leave car CO2 emissions between 2025 and 2050 around 10 percent higher than under existing rules.