France Offers $8.8 Billion Package To Rescue Ailing Auto Industry

The government of French president Emmanuel Macron has unveiled an 8 billion euro ($8.8 billion) plan to rescue the country’s iconic but ailing auto industry.

The package includes 1 billion euros ($1.1 billion) to fund grants of up to 7,000 euros ($7,710) to encourage people to buy electric vehicles. Money will also be set aside to develop projects that will make France a hub of global electric vehicle production.

In exchange for the stimulus, France’s two dominant carmakers, Renault and Groupe PSA (maker of Peugeot and Citroen cars), have vowed to focus their manufacturing on French soil.

"We need a motivational goal -- make France Europe's top producer of clean vehicles by bringing output to more than one million electric and hybrid cars per year over the next five years," Macron said on Tuesday at the Valeo car factory in Etaples, in northern France.

Macron also said that no auto model currently made in France should be manufactured in other nations. Moreover, in order to sell some 400,000 vehicles currently sitting idle in French auto dealerships, Macron’s government will provide a 3,000 euro ($3,300) bonus to people who want to replace their existing car for a less polluting new automobile.

"Our fellow citizens need to buy more vehicles, and in particular clean ones. Not in two, five or 10 years -- now," Macron added.

As part of this “green” strategy, the number of battery charge-points in France will be tripled to 100,000 by the end of 2021.

Last week Bruno Le Maire, France’s minister of economy and finance, said: “We are ready to support the demand for vehicles but it will be support for clean vehicles that emit less [carbon dioxide], especially electric vehicles.”

France made nearly 240,000 electric and hybrid cars in 2019, making it Europe’s top producer, but Germany is set to overtake this market by the end of this year.

PSA reportedly plans to manufacture 130,000 more electric or hybrid vehicles in France by next year, while Renault promised to quadruple the number of electric vehicles it makes in France by 2024.

Renault will also create a 100 kilowatt-hour electric motor for its Renault-Nissan alliance vehicles at its facility in Cleon, France, rather than in Asia,

The overall rescue plan also underscores Macron’s aspirations to make France less dependent on auto imports.

The French auto industry employs about 400,000 people and accounts for about 16% of the country’s industrial revenue.

Meanwhile, the French auto industry – which has suffered an 90% plunge in sales in April year-over-year – braces for job cuts and massive restructuring.

Renault is expected to soon announce the closures of three factories (in Choisy-le-Roi, Dieppe and Caudan) while a fourth factory, in Flins, will be converted into a facility making electric batteries.

The company seeks to cut $2 billion euros ($2.2 billion) in costs.

However, it remains unclear if Renault will receive a 5 billion euro ($5.5 billion) loan that was proposed earlier. Part of that loan required Renault to join a Franco-German consortium to manufacture electric batteries. But Macron said the government will not approve the deal until Renault's management and unions finish negotiations regarding the future of its French workforce and plants

Le Figaro newspaper reported Renault plans to cut 5,000 jobs by 2024.

Renault is also expected to shortly announce the status of its alliance with Japanese carmaker Nissan.

PSA – which the French government owns a 12% stake in – is planning to merge with Fiat Chrysler Automobiles next year to form the world’s fourth-largest carmaker. The merged entity will focus heavily on electric vehicles.

Electrek.com reported that Europe is becoming a dominant player in the electric vehicle industry.

“Investment in electric vehicles in Europe is now outpacing China,” Electrek wrote. “Volkswagen alone is investing €60 billion. Brussels-based non-profit Transport and Environment said that the current level of investment in [electric vehicles] 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 to make [electric vehicles] more affordable than comparable gas- and diesel-powered vehicles.”

Electrek added: “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.”