France and Germany have signaled a willingness to include the United Kingdom’s car manufacturing sector in the European Union’s “Made in Europe” public procurement scheme, contingent on London aligning its tariff policies on Chinese imports with those of the bloc, according to a draft agreement reviewed by officials. This marks a significant development in ongoing negotiations over European car industry regulations and market access.
The proposed agreement would extend the scheme’s rules—originally intended to restrict subsidies and public contracts to European companies—to cover car manufacturers in the 27 EU member states as well as the UK, by recognizing “other European partners that were part of the EU internal market on January 1, 2020.” However, a key condition requires the UK to adopt EU trade protection measures, notably tariffs on Chinese electric vehicles, to benefit from the arrangement. This condition poses a challenge for the British government, which has so far refrained from imposing similarly stringent tariffs on Chinese imports and has seen a significant share of Chinese vehicles in its market.
Other countries with notable car manufacturing sectors, such as Japan, South Korea, and Turkey—who had sought inclusion in the scheme—would not be covered under the current proposal. The draft also incorporates a German proposal to ease the EU’s planned phaseout of combustion engine sales, originally scheduled for 2035.
Negotiations between France and Germany have been ongoing since the summer, focused on setting common policies for combustion engine phaseouts and shaping “European preference” rules aimed at protecting domestic car and parts producers. The effort led by France intends to revitalize the region’s car industry by imposing stricter trade and environmental standards, while Germany has pushed for broader inclusion, especially involving the UK.
For the UK, the offer represents a complex trade-off. While it would secure the market access Prime Minister Andy Burnham has sought, it would require the UK government to implement policies it has previously rejected, including aligning tariffs with the EU and tightening foreign direct investment controls.
The draft also proposes modifications that benefit Germany’s automotive sector by relaxing emissions reduction targets. Instead of requiring a 100 percent reduction in CO2 emissions from cars by 2035 compared to 2021 levels, the new proposal suggests a 90 percent cut with no compensation needed for the remaining emissions through methods like using EU-produced low-carbon steel or sustainable fuels. Additionally, the deal would ease emissions standards for plug-in hybrid vehicles, create a more favorable framework for renewable fuels, and allow greater flexibility in electrifying corporate fleets, all reflecting industry demands.
Sources close to the discussions indicated that negotiations are ongoing and the terms of the agreement, including these environmental and trade measures, may still evolve. French President Emmanuel Macron recently described a deal as “imminent,” though any final agreement will require approval from all EU member states and the European Parliament before becoming law.