On October 16, on the sidelines of the European Union summit in Brussels, German Chancellor Friedrich Merz and French President Emmanuel Macron reached a joint agreement that could mark a turning point in the bloc's climate and industrial policy. Titled 'Securing the Future of the European Automotive Industry,' the document aims to ease regulatory pressure on automakers while protecting local manufacturing from imports. The stakes are high: the automotive sector currently accounts for roughly 7% of the EU's GDP and employs approximately 13 million people, making it one of the union's key economic pillars.
The Core of the Agreement: From Total Ban to 90% Reduction
The central change concerns CO2 emission targets for new cars. Instead of the complete emission reduction set out in the previous roadmap, the new proposal establishes a 90% reduction in average emissions by 2035 compared to 2021 levels. According to the text of the agreement, remaining emissions do not necessarily have to be offset by low-emission steel or renewable fuels. In addition, flexible mechanisms have been introduced for plug-in hybrid electric vehicles (PHEVs) and renewable-fuel vehicles, which are estimated to bring the actual reduction down to around 80%. Manufacturers are also given more time to meet targets: instead of rigid annual deadlines, softer frameworks have been introduced, which, according to the authors, reduces financial pressure during the transformation process.
New Rules: 'Made in Europe' from 2028
The second part of the agreement focuses on protecting local manufacturing. Starting in 2028, Germany and France intend to apply 'Made in Europe' standards to car purchase subsidies, leasing benefits, and public procurement. To qualify for state funding, a vehicle must contain at least 70% components produced in Europe (batteries are excluded from this metric), while at least 10% of battery components must also be manufactured in the region. Both leaders outlined their goal in a joint statement: 'a competitive, innovative, and decarbonized European automotive industry whose products are made in Europe and create the jobs of the future.' Merz called the outcome 'a good day for motorists and for jobs in Germany, France, and across Europe,' while Macron emphasized that the objective is 'to successfully transform our automotive industry while preserving our climate goals and manufacturing in Europe.'
Market and Leading Manufacturers' Reaction
The market reacted positively to the agreement: the European STOXX 600 automotive index rose by almost 2%. Support was also expressed by major industry players Volkswagen and Stellantis, who called the agreement a practical step designed to help the sector get through a difficult period. For companies that have operated for years amid uncertainty over climate regulations, this decision reduces regulatory risks and provides a more predictable framework for planning investments in the transition to new powertrains.
Criticism: Eco-Activists and Suppliers Sound the Alarm
However, the agreement did not pass without severe criticism. Transport & Environment (T&E), a clean transport campaign group, called the proposal a 'historical mistake' and warned that easing the target could slow the transition to electric vehicles and weaken the industry's long-term competitiveness. The European Association of Automotive Suppliers (CLEPA) expressed concern that the 10% requirement for European battery components is too low and potentially threatens around 150,000 highly skilled jobs in the supply chain. Thus, within Europe itself, the debate has shifted from the question of 'electricity or not' to how deeply and quickly the industrial supply chain should be restructured.
What's Next: Ratification and Parliament Vote
Despite significant political resonance, the agreement has not yet entered into force: it must be ratified by EU member states and the European Parliament. The parliament is expected to vote on the European Commission's proposal in Strasbourg on November 23. This stage will determine whether the balance achieved in Brussels between climate ambitions and the protection of European automotive manufacturing will be maintained or if the document will be revised during the legislative process.
