Franco-German plan reshapes EU 2035 car rules

France and Germany have reached a joint position on future EU rules for new cars that would alter the bloc’s 2035 climate framework. The plan sets a target for fleet-average CO₂ emissions from new passenger vehicles to be reduced by 90% by 2035 compared with 2021 levels. This represents a high level of decarbonisation while stopping short of a full requirement for zero tailpipe emissions across all new cars.

Under the joint proposal, an earlier idea that manufacturers must offset the remaining 10% of emissions beyond the 90% reduction would be removed. This change would simplify compliance for automakers, focusing regulation on hitting the fleet-average target rather than mandating compensation for residual emissions.

A central element of the Franco-German package is the introduction of stringent local-content rules linked to public subsidies and public procurement. From 2028, vehicles would need to be assembled in Europe to qualify for such support. In addition, at least 70% of total value creation in components, excluding the battery, would need to take place within Europe.

The proposal also sets a minimum European share for key battery components. At least 10% of the content of the three principal battery components would need to be produced in Europe for a vehicle to access public financial support and procurement channels. These criteria would apply alongside the assembly requirement, creating a combined threshold for eligibility.

The joint position would expand the regulatory framework to recognise renewable and alternative fuels. These energy sources could be counted toward zero-emission classifications under the proposed system. This approach would broaden the set of technologies that can contribute to meeting emissions targets beyond purely battery-electric vehicles.

By allowing renewable and alternative fuels into the framework, the plan keeps internal combustion engine and hybrid technologies within scope after 2035. Vehicles using such technologies could remain part of the market if they comply with the revised emissions and fuel criteria. This introduces additional flexibility in how manufacturers may pursue decarbonisation of their fleets.

Taken together, the Franco-German proposal pairs ambitious emissions reduction goals with strong regional production requirements. Automakers selling into the European market would need to adapt product strategies to meet the 90% CO₂ reduction by 2035 while considering options across electric, hybrid and combustion platforms that can use recognised renewable or alternative fuels.

At the same time, the local-content thresholds for components and batteries, as well as the requirement for European assembly to access subsidies and procurement, would influence investment and supply-chain decisions. Manufacturers and suppliers seeking to benefit from public support would need to ensure a substantial portion of value creation occurs within Europe under the proposed rules.