For the European automotive sector, 2035 is no longer what it used to be

Few objects embody the short-circuiting of our geopolitical crises with the same precision as the car. Among durable goods, it has always been the most maligned, but today, through no fault of its own, it finds itself at the centre of a perfect storm. In a very short space of time, this very artefact – four wheels, an engine (combustion, electric or both; it makes little difference), metres of wiring and an ever-increasing number of algorithms – has found itself dramatically exposed on every front: paralysed supply chains in the Middle East, Beijing’s standoff over rare earths, disputes over semiconductors arising in Dutch courtrooms, Washington’s ever-new tariffs and, to complete the picture, gruelling negotiations in Brussels on decarbonisation that seem to have no end in sight – at least until yesterday. Indeed, it appears that France and Germany are close to an agreement which, on the one hand, should (further) relax the much-discussed 2035 ban on internal combustion engine cars and, on the other, promote car production within the EU, strengthening the sector and its supply chains against looming Chinese competition. To be clear, the first issue is (or was) of greater interest to the Germans and their car manufacturers, while the second is of greater interest to the French and the various French-owned manufacturers (Renault and Stellantis). The current crisis and the relentless march of reality—which sweeps away dreams, expectations and bogus forecasts—unite, underpin and reinforce these two issues, and justify the need for decisive action.

A move that had been in the air – at least according to industry insiders this summer – but which was made official, albeit without specific details, in the words of President Emmanuel Macron spoken in the most fitting of settings: the Paris Motor Show, where, as also reported by the Financial Times, he confirmed that an agreement was imminent.

Macron, quite clearly, spoke of a ‘pragmatic approach to our decarbonisation targets’, which implies flexibility and therefore no longer 100 per cent electric cars on sale by 2035, but a percentage likely to be lower than the 90 per cent that would be the adjustment put in place by the Commission, with a series of complications – starting with green steel – that would be avoided. There is talk of 80 per cent, but for further clarification it is worth knowing (or rather, reading up on) the details of the agreement. Certainly, Paris would secure German support for the requirement that a large proportion of public subsidies and public procurement contracts for electric vehicles and batteries be reserved for manufacturers based in the EU. Berlin, on the other hand, would like greater flexibility regarding the carbon dioxide (CO₂) emission targets calculated at the tailpipe – and thus the growing proportion of electric cars in new registrations – which car manufacturers are already required to meet by 2030, and therefore as early as next year. The initiative should also fit in well with the need to limit imports of Chinese plug-in hybrids, which were deliberately overlooked when countervailing duties on electric cars were decided at the end of October 2024. There should already be an agreement to limit the number of plug-in hybrid cars imported into the EU to 350,000, perhaps with effect from 1 December.

All this belated urgency warrants an explanation that rests on two shaky pillars: one automotive and one political. Course corrections and U-turns, now that electric cars appear to be selling well and the market more generally is recovering (the former up by almost 45 per cent, the latter up by 5.4 per cent since the start of the year), may seem difficult to explain. The trouble, however, is that this recovery is not as European as expected. If we consider only the French manufacturers – taking the struggles of the German ones as a given – there is an unpleasant feeling that many excellent cards have already been played today, with little confidence in the future. We are referring to the many electric remakes from Renault (the 5, the 4, the Twingo), to which those from Stellantis are now being added (the 2CV and the Turbo16, to name the two extremes). In the case of the Italian-French-American giant, CEO Antonio Filosa’s holistic and global approach has also weighed on Macron; Filosa needs to make up ground in the United States and therefore requires less restrictive regulations within the EU. On the political front, both Macron and Merz may have belatedly realised that the car imposed by the infallible officials in Brussels is not to the liking of many consumers, who also bear this in mind to some extent when casting their votes.