Germany and France have agreed on a reform of European automotive policy that would soften the planned 2035 phase-out of internal combustion engines. The 90% CO2 reduction target stays in place, but automakers would no longer need to offset the remaining 10% with climate-neutral fuels or low-carbon steel. Gasoline and diesel vehicles could still be sold after 2035 as long as fleet emissions stay under the cap. The deal also drops mandatory quotas for electrifying large corporate fleets and adds Made in EU requirements for purchase incentives and public contracts. A growing share of batteries and key vehicle components would need to be produced in Europe. Automakers would get more flexibility on CO2 targets, including credits from 2029 and the option to offset 2030 exceedances with 2031 reductions. The reform still needs approval in the Council of the European Union. If adopted, it would shift the focus from a hard ban to fleet-average limits and local content rules, with uncertain effects on EV sales and the pace of grid and charging infrastructure buildout.
