France makes EVs central to an $8.8 billion plan to rescue its auto industry

French President Emmanuel Macron announced an €8 billion ($8.8 billion) plan Tuesday to revive the country’s auto industry in the wake of the COVID-19 pandemic. Increasing production and sales of electric vehicles is central to the plan.

Auto sales in France fell by about 90% in April compared to a year earlier. To rescue the country’s ailing auto industry, Macron said that he wants France to become the leading producer of clean cars in Europe. France will face fierce competition from Germany for that leadership role.

Macron announced that France would increase consumer incentives to buy an electric car to €7,000 from €6,000. The aid is also expected to include incentives for people to scrap their old vehicles and buy a lower-emission model.

Bruno Le Maire, France’s minister of economy and finance, last week said:

We are ready to support the demand for vehicles but it will be support for clean vehicles that emit less CO2, especially electric vehicles.

Macron also tweeted that support for Peugeot-Citroen and Renault, as well as parts suppliers, will increase “massively.” Later today, Macron will visit supplier Valeo, which makes parts for electric cars. Using the Valeo factory in northern France as a backdrop, the president will detail the full rescue plan. France’s auto industry employs about 400,000 people in the country.

The €8 billion does not include a €5 billion government loan guarantee under discussion for struggling Renault, or the millions the government has already spent on temporary unemployment payments to auto workers.

Renault and Nissan will make their announcements tomorrow about the future of their alliance. Renault is expected to close some of its factories in France.

The French government owns a 12% stake in PSA through the state investment bank. PSA reported record profits last year but has also seen sales plunge due to the lockdowns. The company is merging with Fiat Chrysler Automobiles to create the world’s fourth-largest automaker. The merged companies will share electric vehicle platforms.

Electrek’s Take

Investment in electric vehicles in Europe is now outpacing China. Volkswagen alone is investing €60 billion. Brussels-based non-profit Transport and Environment said that the current level of investment in EVs in Europe is nearly 20 times higher than when the group made its last calculation two years ago.

Across the EU, electric cars could become exempt from value-added tax (VAT) to make EVs more affordable than comparable gas- and diesel-powered vehicles.

The pandemic is creating a heightened sense of urgency. In France, it’s a matter of survival for its domestic auto industry and its workers.

Enlightened governments realize that support in these times should accelerate progress toward electric cars – rather than investing in dead-end internal combustion technologies.

As Europe takes a global lead in EVs, mainly due to stricter CO2 regulation, the United States is flat-footed on how battery-electric vehicles can underpin support of its auto industry. In fact, in many ways, President Trump is reversing progress on electrification and reduced emissions from the past decade.

Today’s announcement from President Macron, with more details to come later, is yet another example of how COVID-19 is reshaping the global auto industry. The moves that France and others make in mid-2020 will create the winners and losers in the auto industry for years to come.