France and Germany agreed on Friday to ease European Union CO₂ standards for new cars and define stricter “Made in Europe” rules for electric vehicles, a pact that still requires approval from other EU member states and the European Parliament to become law.

Under the deal, the two countries proposed reducing CO₂ emissions from new cars by 90% by 2035 without requiring automakers to offset the remaining 10%, a shift from the European Commission’s earlier demand for full compensation through measures like low-carbon steel or sustainable fuels. The agreement also introduces a new category of zero-emission vehicles, including combustion engines running exclusively on renewable or low-emission fuels, which could remain eligible for registration after 2035.

The “Made in Europe” criteria would require cars to be assembled in Europe, with at least 70% of their component value—excluding batteries—sourced from the continent starting in 2028. The rules would apply to vehicles eligible for public subsidies or government procurement. France and Germany also agreed to extend so-called supercredits, which give more favorable emissions accounting, to all electric vehicles made in Europe, with additional incentives for smaller models and those using low-emission European steel and aluminum.

French President Emmanuel Macron said the deal balances climate goals with industrial competitiveness, calling it “an investment signal to industry.” German Chancellor Friedrich Merz added that the effective ban on combustion-engine cars “is history.” The proposal would split the automotive rules from the broader Industrial Accelerator Act, with both to be adopted “as fast as possible and simultaneously,” according to EUobserver .

The pact also opens the door for the United Kingdom to qualify under the “Made in Europe” rules, provided it aligns with EU measures on vehicle imports, including those targeting Chinese competition. Renault CEO Francois Provost welcomed the agreement, urging the UK and EU to “join forces” on protecting the industry .