France is launching a package of green measures and tax credits aimed at attracting billions of euros in investment and boosting French industry, including tying subsidies for electric cars to environmental restrictions that would favour European manufacturers. 

The drive led by President Emmanuel Macron is in part a move to counter Washington’s $369bn green stimulus package that has drawn battery makers and producers in industries such as wind energy to the US, raising fears in Europe that it will prompt an exodus of companies. 

Macron is also making a broader push to try to boost manufacturing jobs, an area where France lags behind some of its neighbours such as Germany, and to raise the industry’s contribution to economic output from 10 to 15 per cent. 

The president had argued the EU should introduce “Buy European” legislation similar to parts of the US’s Inflation Reduction Act that would favour European-made components and products. But the idea failed to gain support in Brussels or among other EU members who are more sceptical of protectionist policies.

Instead, the EU this year opted to relax state aid rules on subsidies, allowing countries to offer incentives more readily, and took other steps to boost the region’s green industries. 

That paved the way for France to act on a national level to advance its own ambitions.

On Tuesday, the French government presented a draft law that includes the electric vehicle subsidy tweaks and new tax credits that companies making renewable energy equipment, heat pumps and batteries could request to cover between 20 and 45 per cent of their capital expenditure. These would kick in from next year, with the government expected to hand out €500mn a year under the scheme.

Along with measures to speed up procedures around setting up factories, France estimates it can unlock an extra €23bn of green investment by 2030 and create 40,000 extra jobs.

“We have no reason to be embarrassed by comparisons with the United States,” said finance minister Bruno Le Maire, adding that the aid on offer was comparable with that across the EU.

On electric cars, the law would effectively disadvantage some non-European manufacturers. Incentives worth between €5,000 and €7,000 for new electric vehicles would exclude those deemed to have been assembled in a less environmentally friendly way, including in factories that are powered by coal, and could kick in later this year. 

“These measures will lead us to reserve that bonus to cars made in Europe,” Le Maire said. The finance ministry said cars produced in China produced 45 per cent more emissions than those in Europe. About 40 per cent of the estimated €1.2bn yearly electric car-purchasing incentives handed out in France had gone to Asian-made cars since January, added Le Maire. 

“It’s not our role to use public funds to finance the development of factories in Asia,” he said.

A government official added said the measures were allowed under EU rules as they did not amount to blocking imports. But it remains to be seen if the plans will spark criticism from foreign carmakers or affected countries.

European car manufacturers have been increasingly concerned by the competition posed by the influx of cheaper Chinese-made electric vehicles, and at the same time are racing to boost their own local supply chains, including by producing batteries. 

France is rolling out early-stage subsidies for battery start-ups such as Taiwan’s ProLogium for example, while China’s Envision is also setting up a plant near a Renault factory. 

At the same time, France is looking to court overseas investors as much as possible, including billionaire Elon Musk and his US electric car brand Tesla, which earlier this year scaled back battery production plans in Germany, citing the lure of US president Joe Biden’s green incentives. 

Macron met Musk at the Élysée Palace on Monday ahead of a summit of international chief executives dubbed “Choose France” at which the government is seeking to woo foreign investors.

This year’s summit comes as the French president’s popularity has been damaged by his move to raise the retirement age. He has sought to turn the page on months of protests by focusing on his long-held priority of boosting employment to strengthen the French economy and clean up public finances.

After meeting Macron and Le Maire, Musk said Tesla would make “significant investments” in France in future, without giving details.

France’s draft law on green industries still needs to make its way through parliament, where Macron’s centrist alliance no longer has a majority. Government officials said on Tuesday they believed they could forge a consensus for the bill, which is due to be examined in the Senate in June and the National Assembly in July.