It is a key step towards providing more breathing room for carmakers and some of their top suppliers
Published Sat, Oct 17, 2026 · 10:35 AM
[PARIS] Europe’s auto industry welcomed a deal between France and Germany that provides relief for manufacturers grappling with high costs and intense Chinese competition.
The two countries struck an accord on Friday (Oct 16) that reflects both the German push for looser CO2 standards for the EU auto sector and the French desire for a strict definition on “Made in Europe” rules to protect local production and jobs. The pact means the effective ban on fuel-burning cars “is history”, German Chancellor Friedrich Merz told reporters.
The deal is a key step towards providing more breathing room for carmakers such as Volkswagen, Stellantis and Renault, and for some of their top suppliers like Valeo.
The German-French accord boosted auto stocks, which outperformed other sectors on Europe’s Stoxx 600 index on Friday. Volkswagen, Europe’s largest carmaker, and Fiat and Peugeot maker Stellantis both closed up 2.8 per cent, while BMW rose 3.5 per cent.
Stellantis welcomed the agreement as “an important step toward finalising the European automotive package”. “We believe it can help to bring the process to a rapid conclusion, providing our industry with flexibilities and the clarity it needs,” a spokesperson said.
The proposal will help “rebalance the competitive disadvantage of European manufacturers in the automotive sector versus Chinese ones, and points to the easing of 2035 goals that clearly couldn’t be met”, Stefano Aversa, vice-chair of consultancy AlixPartners, said in a phone interview.
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European automakers have been shedding jobs and shuttering sites as they struggle to keep up with Chinese companies like BYD and SAIC Motor’s MG brand. Earlier this week, they welcomed a plan that will effectively cut the number of these hybrid vehicles China will be able to sell in the European Union by millions over a four-year period.
France and Germany also opened the door to the UK to qualify for European subsidies under the “Made in Europe” rules – but only if Britain also acts to protect its industry from China. Unlike in the EU, there are no additional tariffs on Chinese electric vehicles, nor a cap on imports.
Welcoming the deal, Renault CEO Francois Provost urged the UK and the EU to “join forces” on the effort. “We are one unique ecosystem,” he told reporters Friday in London. “The choice now is for the UK government to decide if it’s better to keep being in this European ecosystem.”
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To be included in Made in Europe, the UK must limit imports of Chinese cars, he said. “We cannot have unsustainable inflow of imports in Europe,” Provost said. He wouldn’t be drawn on whether tariffs were the correct measure to achieve this.
Other key exporters to the EU, such as Japan and Turkey, aren’t included in their proposals. Toyota Motor earlier on Friday had called for countries like them to be recognised as “trusted partners”.
Renault brand CEO Fabrice Cambolive said Renault needs to analyse the detail of the agreement before working out what it means for Morocco and Turkey, where it also produces cars. BLOOMBERG
