Automakers criticized the French government for raising a tax on heavier and more polluting vehicles, a measure that comes on top of tough new European rules being phased in next year to lower car emissions.
Under a law adopted by the French parliament, cars emitting carbon dioxide above a certain threshold will be subject to a 20,000 euros ($22,240) penalty in 2020, higher than the existing 12,500 euros. At the same time, the government is considering reducing cash incentives for the purchase of electric cars.
The measures will impact SUV prices. SUVs are among the most polluting passenger vehicles because they are heavier and less fuel efficient. Despite this, they are popular, making up 30 percent of sales in France in the first 11 months, according to Paris-based consultancy Inovev. While electric-car sales are growing quickly, they still make up a tiny proportion of the overall market.
The measures have come under fire from the French industry.
"It's a double penalty for consumers," Luc Chatel, head of French automotive organization PFA, said in a statement, which called the policy "incoherent."
"The electric-car market won’t take off without strong purchasing incentives," Chatel said. "Everyone has something to lose: The industry, the environment and the purchasing power of the French."
Subsidies to consumers for electric vehicles can be costly to taxpayers. France's bonuses reached 550 million euros last year, according to the French auditor.
Germany has also put in place similar incentives, which BloombergNEF estimates could cost as much as 2.6 billion euros by 2025.
France’s SUV levy comes as the European car industry prepares for the phasing in next year of emissions rules that will see carmakers fined if their total annual vehicle sales exceed an average carbon limit.
The French finance ministry has estimated its SUV penalty could yield 50 million euros a year in revenue for the government, which will be used to help carmakers shift to cleaner cars.
Finance Minister Bruno Le Maire has also criticized SUV advertisements, saying they should warn consumers of the detrimental effects of the cars on the environment.
France is seeking to reduce subsidies for electric and hydrogen cars in the years to come on the assumption that prices will drop. In 2020, the central government will give as much as 6,000 euros toward the purchase of an electric car costing less than 45,000 euros. The handout is set to drop in 2021 and 2022, the environment ministry has said.