Inicio Policity and Regulation France rolls out new cash incentives for electric cars, takes aim at...

France rolls out new cash incentives for electric cars, takes aim at China

France rolls out new cash incentives for electric cars, takes aim at China

New cash incentives to help consumers purchase an electric vehicle (EV) will be rolled out in France as of January 2024, aiming to support French and European carmaking industries in their competition with Chinese rivals, the government announced on Monday (18 September).

The ‘green bonus’, once a €5,000-flat cash incentive applicable to all EVs regardless of their production cycle or green attributes, will now more strictly take into account the car’s life cycle and components, such as the electric battery.

“We used to only focus on CO2 emissions while driving” but failed to account for the entire production line before the car reaches the road, the government told Euractiv. Under the new rules, a ‘green score’ will be given to each EV as part of a broader goal: to bring EV production lines back to France and the EU.

Through a reform of the ‘green bonus’, the government is looking to “reward the greenest EVs, especially those made in France and the EU,” Agnès Pannier-Runacher, the minister for energy transition, told French TV broadcaster BFMTV over the weekend, adding that this would boost local job creation and reduce overall car prices.

This score, the details of which will be published in a decree on Tuesday, should integrate six new CO2-emitting factors, including emissions from steel and aluminium production, usage of critical raw materials in both the body of the car and the battery, and the car’s assembly and transport to the destination of the buyer.

The bonus can top €5,000/car, and even go up to €7,000 for poorer households, and some €1 billion has been carved out to finance it.

Flooded EU market

“A car made in China with coal-produced electricity will not benefit from the green bonus,”  Pannier-Runacher said. This includes car models such as “the Dacia Spring or the China MG,” the minister added, though the full list of excluded EVs will only be revealed in December.

This is no secret: France, home to carmaker behemoths Renault and Stellantis, is keeping a close eye on China, which has been flooding the EU market with its own EVs. With Chinese brands having attained 8% of the EU’s electric vehicle market in 2022, European Commission data shows that they could increase it to 15% by 2025.

According to the consultancy Ptolemus Consulting Group, Chinese EV prices in China dropped by around 50% between 2015 and 2022, from €67,000 to €32,000. European EV prices, on the other hand, went up 17% in the same period, from just under €49,000 to over €55,000, putting them out of reach of many ordinary Europeans.

“French and European carmakers have been ringing alarm bells over the fast reversing of trends in EU exports to China,” Elvire Fabry, a senior research fellow at the Jacques Delors Institute, told Euractiv.

Unlike European automakers, who have focused on high-end – and ultimately more expensive – SUVs, the Chinese have produced cheaper options en masse, making their cars even more attractive to EU buyers, Fabry said.

China, beware

Bringing production back to Europe and supporting European carmakers’ economies of scale is driving France to review its incentive scheme, in the hope of reducing dependencies on China.

This is not the first time in recent months that France had a stab at China.

Just a month ago, Economy Minister Bruno Le Maire announced he would widen the scope of foreign investment screening to the mining sector, so as to more effectively control the extraction and processing of critical raw materials such as lithium, necessary to produce electric car batteries.

China is dominant in processing many of these raw materials, even if it is not mining them. For example, while only 9% of the world’s lithium is mined in China, some 60% is refined there, according to a report by the German Institute for Economic Research (DIW).

Last week, European Commission chief Ursula von der Leyen further announced a new anti-subsidy probe against Chinese EVs – following months of heavy lobbying by the French.

“It is a crucial industry for the clean economy, with a huge potential for Europe. But global markets are now flooded with cheaper Chinese electric cars. And their price is kept artificially low by huge state subsidies,” she said in her State of the Union speech.

Fabry told Euractiv that “China is reaping the fruits of 15 years’ worth of heavy subsidies and tax reduction schemes” to support the growth of their EV sector”.

As China moves out of subsidies into a more market-oriented economy, the anti-subsidy probe announcement falls at the right time, according to the scholar: It signals Europeans’ determination to fight for fair competition and more reciprocity from China.

The ‘green bonus’ fits into these broader EU efforts to curb China’s flooding of the Single Market: it is “common sense policy-making, enshrined in our green industry strategy, and a first-of-the-kind in Europe,” Le Maire said.

Whether this will effectively keep Chinese EVs at bay remains to be seen.

[Edited by Sean Goulding Carroll/Zoran Radosavljevic]

Read more with Euractiv

Subscribe now to our newsletter EU Elections Decoded