France introduces new subsidies for electric vehicles: do not give "Made in China".

In September, the French government announced that from January 2024, it would introduce new subsidies for electric vehicles that would take into account the carbon footprint of vehicles. On December 14, France announced the list of electric vehicles eligible for subsidies under the new regulations, which can receive subsidies of up to 7,000 euros per electric vehicle.

The three most popular BEVs in France (the Dacia Spring minicar, the Tesla Model 3 and the MG4 compact car) are excluded from this list, all three of which are produced in China and sold in France.

Under the new subsidy requirements, CO2 emissions from the manufacturing process of vehicles will be taken into account, and most of China's energy comes from fossil fuels (mainly coal), and the transportation of electric vehicles to Europe involves more carbon emissions in the logistics sector, so the new French subsidy rules for electric vehicles are intended to exclude "Chinese-made cars".

01

Which models are subsidized?

The list of models eligible for the electric subsidy includes 24 BEVs from Stellantis and 5 from Renault. The German-made Tesla Model Y is eligible for the subsidy, but the Chinese-made Model 3 is not. Smart made in China is also not eligible for subsidies, but ForTwo made in France can.

In the past two years, the European Commission and local automakers have expressed concern that Chinese electric vehicles will seize the market share of European-made cars.

The French government has always wanted to allow consumers to buy electric vehicles made in France and Europe.

According to data from Jato Dynamics, in the first half of 2023, the average retail price of electric vehicles in Europe exceeded 65,000 euros (about 71,000 US dollars), while the average retail price of electric vehicles in China was only slightly more than 31,000 euros.

To accelerate the adoption of electric vehicles, the French government has provided buyers with cash subsidies of 5,000 to 7,000 euros, with a total annual expenditure of 1 billion euros.

However, French finance officials said that a third of France's subsidies had previously gone to consumers who bought Chinese-made electric vehicles due to a lack of affordable European-made electric vehicles. This phenomenon has led to a significant increase in China's EV imports, hitting French and other European manufacturers, with a growing competitive gap between the two.

02

An unavoidable subsidy war

The new EV subsidy rules are intended to support French and local automakers by excluding Chinese-made EVs from the subsidy.

French President Emmanuel Macron also said on December 14 that "we will produce more and more cars in France" through social media platforms, representing the goal of France's industrial renaissance plan - to bring industrial manufacturing and industrial chains back to France and the European Union.

A spokesperson for the MG brand told Reuters on Thursday that the loss of the subsidy would have an impact on sales, but the company chose not to apply for the subsidy for the model, given the criteria and deadlines set by the French government.

A Dacia spokesperson said that Dacia will not comment on the eligibility of the subsidy and that the impact on sales is uncertain at this time, as Dacia Spring is sold throughout Europe and will also be sold in the UK market in 2024.

The Dacia Spring ranks 15th out of all cars sold in France, with 26,951 units sold as of November, and is also the cheapest all-electric car in Europe, priced at around €20,000. It is the second-best-selling electric car in France, behind the Tesla Model Y. 

With 19,749 units sold as of November, the Tesla Model 3 is the third best-selling battery electric vehicle. At the end of November this year, the MG4 sold 15,934 units in France, making it the fourth best-selling battery electric vehicle.

03

What the EU is most worried about is the price advantage of Chinese car companies?

The EU's raising of trade barriers has bought time for European manufacturers to close the gap with Chinese manufacturers. European automakers have launched cheaper electric vehicles produced on the continent, including the Citroen New e-C3 for 23,900 euros and the Renault 5 for 25,000 euros.

Looking ahead, cheaper electric vehicles will also be put into production, including the short-range New e-C3 priced at 19,900 euros and the Renault Twingo, priced at less than 20,000 euros. 

According to foreign media reports, Volkswagen and Renault are in talks to jointly develop a low-cost model. 

A French government adviser said before the release of the list that the new rules are based on environmental protection considerations, and the French government believes that the new rules are in line with the World Trade Organization's (WTO) protectionist provisions. The remarks seemed to indicate that France was taking into account the trade implications.

Conclusion

The introduction of the new regulations on electric subsidies in France is a microcosm of the EU's attitude towards China's made electric vehicles, and the EU's countervailing investigation of Chinese electric vehicles may lead to new tariffs.

The advantages of China's industrial chain have achieved price advantages, European manufacturers pursue high-profit models, ignoring popular models, and Chinese products are not cheap, but European products are too expensive.

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