France and Germany are nearing an agreement that would delay the European Union’s planned phaseout of combustion engine vehicles, aiming to strengthen the continent’s car industry amidst growing competition from China. The deal is expected to be announced soon and includes measures to prioritize car production within the EU and adjust emissions targets, according to officials familiar with the discussions.

French President Emmanuel Macron described the accord as “imminent,” highlighting efforts to balance industrial protection, decarbonization goals, competitiveness, and European sovereignty. He noted ongoing negotiations with German counterparts and suggested the announcement could come within days. The talks have centered on revising EU legislation that would extend the sale of combustion engine vehicles and implement “Made in Europe” rules reserving subsidies and public contracts for vehicles, parts, and batteries manufactured inside the EU.

The anticipated agreement, which still requires approval from other EU member states and the European Parliament, is expected to soften the EU’s climate ambitions and may provoke friction with international trade partners such as the United Kingdom and Japan. These countries could be excluded from the new preferential purchasing framework under the “Made in Europe” initiative, raising concerns about potential trade disputes.

Key to the deal is Germany’s push to ease the EU’s 2030 emissions reduction targets for carmakers. Sources close to the negotiations indicated that while this point remains unsettled, Germany is likely to secure a loosening of the planned 2035 ban on combustion engines. Under the proposed terms, combustion engine vehicles would still be allowed to constitute up to 10% of new car sales after 2035, without stringent requirements for low-carbon fuels or materials.

In return, France is expected to gain German backing for stricter restrictions on public subsidies and contracts, limiting these financial supports primarily to manufacturers based within the EU. This provision, if finalized, could exclude British carmakers from accessing certain subsidies, although this aspect has not yet been conclusively determined.

Renault Chief Executive François Provost indicated a deal was likely ahead of the Paris Motor Show, where European and Chinese automakers are unveiling new models. He emphasized the importance of prompt action to protect the industry, which supports about one million jobs in France alone. Provost underscored that car manufacturers have invested heavily in transitioning toward electric vehicles in line with EU policies.

The negotiations have also addressed concerns regarding manufacturers such as Renault and Ford, which produce vehicles with a significant proportion of European components in non-EU countries like Turkey. These companies have sought clarity on the “Made in Europe” rules, advocating for exceptions to accommodate certain third countries in order to maintain supply chains and production flexibility.