France has recently introduced new eligibility criteria for electric car incentives, effectively excluding electric vehicles (EVs) made in China. This move is aimed at curbing the purchase of Chinese EVs, even though there are no more affordable European-made alternatives available on the French market.

EV bonus eligibility rules

France currently provides cash incentives ranging from 5,000 to 7,000 euros for eligible EV models to promote electric vehicle adoption. This programme costs the French government approximately 1 billion euros ($1.07 billion) annually. However, a significant portion of these incentives has been going to consumers purchasing EVs made in China, leading to a surge in imports and a growing competitive gap with domestic automakers.

What are the new rules’

Under the revised rules, car models will be assessed based on government-defined criteria, including the energy used in their manufacturing process, assembly, and transportation to the market, as well as the type of battery used in the vehicle. Given that Chinese industries often rely on coal-generated electricity, these criteria are expected to make it difficult for Chinese carmakers to qualify for the incentives.

The French government plans to publish a list of models that meet the new standards in December. It argues that these criteria are compliant with World Trade Organisation (WTO) rules, as exemptions are permitted for health and environmental reasons.

Impact and implications

While the bonus could make a difference for EVs priced below 25,000 euros, French car buyers may need to wait for European-made EVs, such as Stellantis’ e-C3 and Renault’s R5, which are not expected to be available until 2024.

Despite the new rules, many China-made EVs may still remain competitive even without the cash incentive, as they are estimated to be 20 per cent cheaper than their European counterparts.

Although most Chinese cars may not qualify for the bonus, analysts predict that they could still capture 7-8 per cent of France’s electric car market in the coming year, slightly less than the 10 per cent share they would have otherwise achieved.

As a result of these changes, some manufacturers, like MG’s parent company SAIC and Chinese rival BYD, are reportedly exploring production sites in Europe, aiming to compete in the same segment as the China-made MG4 and Renault’s Megane. This suggests a potential shift in production locations in response to the new rules.

Renault CEO Luca De Meo has indicated that he would rather forgo the bonus than relocate production of certain models from China to Europe, emphasising the importance of competitive pricing and market dynamics.

(With Reuters Inputs)