AutosFrance adjusts electric car subsidies, challenging Chinese production

France adjusts electric car subsidies, challenging Chinese production

The new French law hits electric products manufactured in China.
The new French law hits electric products manufactured in China.
Images source: © Bloomberg via Getty Images | Bloomberg

12:32 PM EST, December 20, 2023

Europe's intention to challenge Chinese car manufacturers has been quite apparent since the European Commission launched its investigation. The crux of the concern centres around the government subsidies that Chinese brands receive. These subsidies enable them to price their models lower, thereby gaining a substantial advantage over their European counterparts.

The move by France was inevitable, demanding greater effort from Chinese companies. Although this decision might have both pros and cons, it is not surprising from a country known for its patriotic stance towards automotive matters.

New regulations focus on the carbon dioxide emissions during car production. With Europe progressively leaning towards renewable energy sources, China remains heavily reliant on coal, even for the production of electric cars. Cars that are predominantly made using fossil fuels will no longer be eligible for subsidies under the new regulations.

As a result, customers will no longer be eligible for financial support when purchasing three of France's best-selling electric cars - the Dacia Spring, Tesla Model 3, and the Chinese MG4. All these vehicles are produced in China before they are shipped to France.

Under this setup, the Tesla Model 3 manufactured in China will not receive subsidies, while the Tesla Model Y produced in Germany will continue to do so. Similarly, the Smart #1 from China will not receive subsidies, while the France-produced Smart ForTwo will. Since European factories release significantly less CO2, they continue to qualify for French subsidies.

The list of models eligible for subsidies includes 24 vehicles from Stellantis and 5 from Renault, which hold significant importance for the French. Unfortunately, Dacia Spring, Renault Group's electric bestseller, will be heavily impacted. Despite immediate effects of the subsidy loss, Romanians predict that the overall losses may be limited due to the car's comparatively low price.

France has outlined unique regulations that strike not only Chinese brands but the entire Chinese automotive industry, all while avoiding accusations of market discrimination. They can always counter accusations with a straightforward argument: "We prioritize eco-friendly car production. Cars failing to meet these norms would not qualify for subsidies." 

Tesla's factory in Grünheide near Berlin. Cars from this plant will still receive French subsidies.
Tesla's factory in Grünheide near Berlin. Cars from this plant will still receive French subsidies.© Getty Images | Bloomberg
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