New French EV incentives take aim at sales of Chinese cars

PARIS -- The French government is revamping its system of electric vehicle incentives to take into account the amount of energy used in the manufacturing and production process -- a measurement that could exclude many EVs made in China.

France has some of Europe’s most generous EV incentives, with buyers of new cars receiving 5,000 to 7,000 euros, depending on income, in addition to a trade-in bonus. The incentives and trade-in bonus can cut the price of a new EV by 10,000 euros or more.

But critics say that too much of the incentive money -- a total of more than 1 billion euros per year in France -- is going toward the purchase of EVs made in China, where labor costs are lower and the government offers much more support for EV production.

The European Commission has begun investigating whether to set punitive tariffs to protect its producers from imports of cheaper Chinese EVs that it says benefit from state subsidies.

French President Emmanuel Macron and government ministers have made little secret that they want to make sure French state cash is not benefiting Chinese automakers.

A French finance ministry source recently told Reuters that one-third of incentives to consumers buying EVs are going toward vehicles made in China, including cars from SAIC’s MG, the Dacia Spring from Renault Group and the Tesla Model 3.

European automakers, however, have yet to produce inexpensive EVs, although Citroen, Volkswagen Group and Renault have said they are aiming to sell electric vehicles at 25,000 euros or less. The Dacia Spring is currently the least expensive EV on the market in Europe, at about 16,000 euros including incentives in some countries.

The trend has helped spur a surge in imports from China and a growing competitive gap with domestic producers.

Starting Dec. 15, France will take into account the carbon emitted in a model’s manufacturing process, the Ministry of Energy Transition said on Wednesday.

“Until now, incentives have been conditional only on weight, price and greenhouse gases emitted during use,” the ministry said in a release. “This approach does not reward the most virtuous vehicles, because it does not take into account emissions linked to the entire life cycle, from manufacturing to use on the road.”

Under the new rules, car models will be scored against government-set thresholds for the amount of energy used to make their materials, in their assembly and transport to market, as well as what type of battery the vehicle has.

Because Chinese industry generally relies heavily on coal-generated electricity, the criteria are likely to put the bonus out of reach for many Chinese automakers.

The government, which is to publish in December the names of models meeting the new standards, says that the criteria are compliant with World Trade Organization rules because exemptions are allowed for health and environmental reasons.

With Chinese cars estimated to cost 20 percent less than those made in Europe, the bonus could make a difference for vehicles with a price tag of less than 25,000 euros.

But French car buyers will have to wait because Stellantis' Slovakia-made Citroen e-C3 city car and Renault's France-made R5 are not due to enter the market until 2024.

Nonetheless, many EVs made in China will remain competitive even without the cash incentive.

With a starting price of rouhgly 30,000 euros, SAIC’s MG4 will be less expensive than Renault's equivalent Megane electric compact car, which starts at 38,000 euros -- or 33,000 euros with a 5,000-euro incentive.

Tesla's Model 3 -- one of the best-selling EVs in France -- could also be affected by the new rules for vehicles made in China. The Model Y, the best-selling car overall in Europe, is built in Germany, although some units come into Europe from Tesla's factory in Shanghai.

S&P Global Mobility analyst Lorraine Morard said that even if most Chinese-built cars are ineligible for the bonus, they would probably still have 7 to 8 percent of France's electric car market next year, instead of 10 percent otherwise.

Renault CEO Luca de Meo recently ruled out moving production of the Spring from China to Europe and said he could live without the bonus.

The model is currently one of the best-selling electric car's in France with the Model Y, Peugeot's e-208, Fiat's New 500, the Megane E-Tech and MG4.

MG's Chinese parent company, SAIC, has said that it is looking for a production site in Europe as is Chinese rival BYD, whose Dolphin model will compete in the same segment as the MG4 and Megane with a starting price of less than 30,000 euros.

Peter Sigal and Reuters contributed to this report