Grand bargain
France and Germany are in advanced talks on an agreement that would redraw Europe’s car policy but profound differences over Brussels’ “Made in Europe” proposals are complicating the discussions, writes Ian Johnston.
Context: The European Commission has proposed a string of automotive legislation, including a review of the phaseout of combustion engines and requirements for cars to be made in the EU to benefit from public money. The sector is in serious trouble from a slowdown in demand and Chinese competition.
The Élysée Palace and the Chancellery had been negotiating for months on the combustion engine phaseout and measures to protect carmakers from Chinese EVs. Progress has been slow, said people familiar with talks, but officials and industry groups say a deal remains in reach in the months ahead.
The negotiations could help German carmakers reliant on combustion engine vehicle sales by softening emissions rules for cars in 2030 and 2035, while delivering a French priority of favouring EU manufacturers in public contracts, under a proposed Industrial Accelerator Act.
The car legislation was so intertwined that “the only way is to find a deal on the overall automotive package”, one Commission official said.
One French official said: “We are ready for flexibilities, loosening [of CO₂ standards] but we want these to reward carmakers who are choosing to invest in Europe.” Relaxing the emissions rules would amount to a significant move from Paris, which has championed electric cars.
Germany, meanwhile, has consulted with its car industry during the talks, industry sources said. Their priorities are to relax CO₂ standards in 2030 to avoid fines for breaching emission rules, and for legislation to be more accommodating of alternative fuels and plug-in hybrid vehicles and to make targets for the greening of corporate fleets voluntary.
But the negotiations have been hamstrung by divergence on “Made in Europe” rules. A German position paper repeating a preference to include manufactured goods from free-trade partners in the Industrial Accelerator Act underlined the differences with France, whose industry minister Sébastien Martin repeated demands for an EU27 approach.
France is also not just reaching out to Germany. One minister said Martin had spoken to his counterparts at last week’s Competitiveness Council to “find allies for landing zones”.