The French government has announced that starting from January 2024, it will introduce new cash subsidy measures for electric vehicles and will publish the list of eligible subsidies in December. On December 14, local time, France officially released the list of electric vehicle subsidies, with a maximum subsidy of €7,000 (approximately $7,640) per electric vehicle.
Notably, the new regulations for electric vehicle subsidies in France involve the carbon footprint of vehicles. However, considering China's dependence on coal and the carbon emissions associated with transporting electric vehicles to Europe, the new regulations effectively exclude electric vehicles manufactured in China, showing a preference for electric vehicles manufactured in France and Europe.
French Finance Minister Bruno Le Maire praised the new regulations as an incentive for automakers to reduce their carbon footprint. He emphasized, "Hundreds of millions of euros in public funds are flowing to electric vehicles with very low carbon footprints. We will no longer subsidize electric vehicles that emit too much carbon dioxide and encourage automakers to decarbonize in the production and transportation processes to qualify for subsidies."
France Subsidy List: Top 3 Most Popular EVs Excluded
According to the new regulations released by France from December 15, the country will provide tax refunds based on household income for electric vehicles priced below €47,000, aimed at promoting the production of local zero-emission vehicles and their components.
The Ademe agency is responsible for overseeing the process of establishing the electric vehicle subsidy list in France, studying whether nearly 500 electric vehicle models and related versions meet the requirements of the plan. Approximately 65% of electric vehicles sold in France will meet the subsidy criteria.
Electric vehicles eligible for subsidies include Tesla's Model Y produced in Germany, luxury electric vehicles from Mercedes and BMW, 24 electric vehicles from Stellantis, and 5 electric vehicles from Renault.
However, the top three most popular electric vehicles in France-Dacia Spring, Tesla Model 3, and MG4-will lose eligibility for electric vehicle subsidies. These three electric vehicle models are manufactured in China and then exported to France. Additionally, the American-made Tesla Model 3 is also not on the subsidy list.
It is reported that from January to November of this year, the total sales of Dacia Spring in France were 26,951 units, making it the second best-selling electric vehicle in France (after Tesla Model Y). Tesla Model 3 and MG4 are the third and fourth best-selling electric vehicles in France, with sales of 19,749 units and 15,934 units, respectively.
Several executives from Dacia have previously indicated that they expected the Spring to lose eligibility for subsidies. A Dacia spokesperson stated on December 14 that Dacia would not comment on the French electric vehicle subsidy list but mentioned that the impact of the new regulations on the sales of this model is still uncertain as the Spring is sold in various European countries and will enter the UK market in 2024.
Reportedly, Dacia Spring is the cheapest electric vehicle in Europe, with a pre-subsidy price of about €20,000. According to data released by Dataforce, from January to October of this year, 63,051 units of Model 3, 52,250 units of MG4, and 48,954 units of Dacia Spring were sold in Europe.
MG Motors stated that it expects the new regulations to bring pressure to the French electric vehicle market. An MG spokesperson told Reuters, "Some electric vehicles will completely lose competitiveness," adding that MG has decided not to apply for subsidies for its MG4 because France's electric vehicle subsidy plan "aims to exclude us."
France: New regulations aim to promote localization of production, in line with WTO trade rules
Previously, the French government had hoped to make electric vehicles manufactured in France and Europe more affordable to domestic consumers, especially in comparison to cheaper electric vehicles produced in China.
According to research by Jato Dynamics, in the first half of 2023, the average retail price of electric vehicles in Europe exceeded €65,000 (approximately $71,000), while the average retail price of electric vehicles in China was slightly over €31,000.
To popularize more electric vehicles, the French government had previously provided cash subsidies of €5,000 to €7,000 to consumers purchasing electric vehicles, with an annual total expenditure of €1 billion (approximately $1.1 billion).
However, several French finance ministry officials had previously stated that due to the lack of cost-effective European-made electric vehicles, one-third of France's subsidies had been given to consumers purchasing Chinese-made electric vehicles. This led to a significant increase in the importation of Chinese-made electric vehicles, severely impacting French and even European automakers and widening the competitive gap between the two sides.
French President Emmanuel Macron and ministers of the French government have consistently expressed their desire to ensure that French government funds do not benefit Chinese automakers.
Therefore, when announcing the new regulations on September 18, the French government hinted that it hoped to exclude electric vehicles manufactured in China from subsidies, thereby supporting the competition between French and European automakers and their Chinese counterparts.
"We will produce more and more cars in France," Macron also stated in a video posted on social media on December 14. "The key is to help you choose electric cars made locally."
The new subsidy plan in France also has a broader goal-to bring back the production of electric vehicles to France and the European Union. It is reported that several Chinese automakers, including SAIC Group and BYD, have indicated that they are considering producing in Europe.
In addition, France seems to have taken into account the trade impact. A French government advisor stated before the list was released that, given the environmental protection basis of the new regulations, France believes that the regulations comply with the World Trade Organization (WTO) rules regarding protectionism.
Conclusion
France's new electric vehicle subsidy regulations can be seen as a reflection of Europe's current attitude toward Chinese-made electric vehicles.
As France excludes Chinese-made electric vehicles from subsidies, the European Union has also launched an anti-subsidy investigation into Chinese-made electric vehicles, which may lead to the imposition of new tariffs.
As Elvire Fabry, a senior researcher at the Jacques Delors Institute, said, "French and European automakers have been sounding the alarm about the rapid reversal of the trend of EU exports to China."
However, the EU finds itself in a dilemma when conducting investigations and considering corresponding measures. On the one hand, the EU seeks to increase economic independence, but on the other hand, the EU does not want to lose the opportunity to enter the vast Chinese market.
