The French government has decided to modify the rules and amounts of incentives for electric vehicle purchases, triggering a trade dispute with China. Gallic authorities have established a list of eligible vehicles for the new incentives, excluding electric cars manufactured in China, even if they are non-Chinese brands.
Eligible vehicles must achieve a minimum score of 60 points on a scale of 80, according to a grid developed by Ademe, the Environmental and Energy Management Agency (decree of September 19, 2023, Official Journal of September 20). This includes the materials used (steel, aluminum, etc.), battery production, assembly, and even transportation to dealerships, considering various modes (ship, train, truck, etc.). The ecological score of vehicles may be reviewed quarterly.
This is because the Gallic authorities have defined a list of vehicles covered by the new values and exclude electric cars manufactured in China, even if they are non-Chinese brands.
The list of eligible electric vehicles (EVs) for subsidies includes about 60 vehicles costing up to 47,000 euros, for which financial support of €5,000 per vehicle (€7,000 for low-income families) is available.
In total, 22 electric vehicle brands are part of the list released by the government, including major French manufacturers such as Citroën, Peugeot, and Renault, as well as other European brands like BMW, Fiat, Mercedes-Benz, Smart, Volkswagen, and Volvo.
Up to 78 different models are available, including the Audi Q4 45 e-Tron, as well as the BMW iX1, BMW iX2, and Citroën ë-C4.
| ABARTH | 500 |
| AUDI | Q4 45 E-TRON |
| BMW | SÉRIE 4 |
| SÉRIE X | |
| BMW iX1 | |
| BMW iX2 | |
| CITROËN | ë-C4 |
| ë-C4 X | |
| ë-BERLINGO | |
| ë-BERLINGO | |
| JUMPY SPACE TOURER | |
| CUPRA | BORN 150 KW 58/62 KWH |
| BORN 170 KW 77/82 KWH | |
| BORN 170 KW 58/62KWH | |
| DS | DS 3 |
| DS 3 CROSSBACK | |
| FIAT | E-DOBLÒ |
| 600 | |
| ULYSSE | |
| HYUNDAI | KAUAI |
| JEEP | AVENGER |
| MAZDA | MX-30 |
| MERCEDES-BENZ | EQA |
| EQB | |
| EQT | |
| MINI | MINI |
| NISSAN | TOWNSTAR |
| LEAF | |
| OPEL | COMBO |
| COMBO-E LIFE | |
| ASTRA | |
| ASTRA SPORTS TOURER | |
| CORSA | |
| MOKKA | |
| ZAFIRA LIFE | |
| PEUGEOT | e-RIFTER |
| 308 | |
| 3008 | |
| 208 | |
| 2008 | |
| EXPERT TRAVELLER | |
| RENAULT | ZOE |
| TWINGO | |
| MEGANE | |
| SCENIC | |
| KANGOO E-TECH ELECTRIC | |
| SKODA | ENYAQ |
| ENYAQ Coupé | |
| ENYAQ 80 | |
| ENYAQ 60 | |
| ENYAQ 80X | |
| ENYAQ 50 | |
| SMART | FORTWO |
| TESLA | MODEL Y |
| TOYOTA | PROACE CITY VERSO ELECTRIC |
| PROACE CITY VERSO | |
| PROACE CITY | |
| VOLKSWAGEN | UP! |
| ID.3 PRO S 150 KW | |
| ID.3 PRO 150 KW | |
| ID.3 PRO 107 KW | |
| ID.4 PURE 125 KW | |
| ID.4 PRO 150 KW | |
| ID.4 PURE 109 KW | |
| ID.4 PRO 128 KW | |
| ID.4 PRO 210 KW | |
| ID.4 GTX 220 KW | |
| ID.4 PRO 4MOTION 210 KW | |
| ID.4 GTX 250 KW | |
| ID.5 PRO 150 KW | |
| ID.5 PRO 128 KW | |
| ID.5 PRO 210 KW | |
| ID.5 GTX 220 KW | |
| ID.5 GTX 250 KW | |
| ID.7 PRO 210KW | |
| VOLVO | C40 |
| XC40 |
The reason for models “Made in China” not being included in this list relates to the carbon footprint of production. More specifically, the rules that determine which cars are eligible for state subsidies exclude models produced where electricity is generated and transported through coal burning.
“We will no longer subsidize vehicles that emit a significant amount of CO2,” says Finance Minister Bruno Le Maire.
“CAR MANUFACTURERS WILL BE ENCOURAGED TO DECARBONIZE THEIR PRODUCTION PROCESSES TO ACCESS THE BONUS,” EMPHASIZES THE FRENCH GOVERNMENT.
The Ademe agency, overseeing the process, studied the eligibility of nearly 500 models and their variants for inclusion in the scheme. According to Reuters, about 65% of electric vehicles (EVs) sold in France remained on the list, including 24 produced by the Stellantis group and five by Renault. The Tesla Model Y will be eligible (manufactured in Berlin), but not the Model 3 (made in China).
By being excluded from this ecological bonus, vehicles like the Tesla Model 3, Dacia Spring, or MG4, produced in China, will face penalties compared to competitors manufactured in Europe.
The electric vehicle brand MG Motors, owned by the Chinese company SAIC, stated that it expects the new rules to impact sales. A spokesperson for MG told Reuters, “There are cars that will completely lose their competitiveness,” adding that the brand decided not to apply for the bonus scheme for its MG4 model because the scheme was “designed to exclude us.”
THE CHINESE AUTOMOTIVE INDUSTRY IS HEAVILY DEPENDENT ON COAL-GENERATED ELECTRICITY, WHICH MEANS MANY “MADE IN CHINA” ELECTRIC VEHICLES WILL NO LONGER RECEIVE INCENTIVES.
This decision represents a significant signal aimed at forcing a shift towards more sustainable manufacturing by economies such as China. China’s production is heavily reliant on fossil fuels and coal burning to gain a competitive advantage over France in this context.
“The regulations in Europe make electric cars manufactured in Europe about 40% more expensive than equivalent vehicles made in China,” said Stellantis CEO Carlos Tavares to Automobilwoche in Las Vegas earlier this year. “If the European Union does not change the current situation, the automotive industry in the region will suffer the same fate as the European solar panel industry,” says Carlos Tavares, referring to a previous trade conflict with Beijing that saw China dominate a solar panel industry that had been largely developed in Europe. “I think we’ve seen this movie before… It’s a very bleak scenario.”
These new rules impact electric vehicles (EVs) produced in China more severely, where a significant portion of electricity production is based on coal burning, but other countries will also be affected, such as India.
The French government already provided electric vehicle buyers with a cash incentive ranging from 5,000 to 7,000 euros, with a total cost of one billion euros per year.
However, one-third of all incentives were being directed to consumers purchasing electric vehicles (EVs) manufactured in China, according to authorities from the French Ministry of Finance. This trend has contributed to a surge in imports and a growing competitive gap with domestic producers.
What increases will Chinese-made models have?
The Dacia Spring, manufactured in China and representing 1 in 10 electric cars sold in France, will see its price increase from €15,800 to €20,800 without the bonus, according to Les Echos. Also excluded from the list is the MG 4, an electric sedan of British brand owned by China’s SAIC Motor. Priced at €30,000 before the bonus, this electric vehicle (EV) currently holds 61.4% of the French market in terms of registrations since the beginning of this year, as reported by Les Echos.
The Tesla Model 3, exported to Europe from the Tesla factory in Shanghai, is no longer eligible for tax incentives in France. However, the Model Y, the world’s most popular EV, is included in the list as it is assembled in Germany.
Other examples include the Atto 3 and Dolphin from BYD, which will no longer be eligible. The Kia Niro (assembled in South Korea) and the Hyundai Kauai (manufactured in the Czech Republic) remain eligible for the bonus.
How many vehicles will be left out?
The majority of premium EV models are not eligible because they exceed the price limit of 47,000 euros (for example, Audi Q8 e-tron, BMW iX3, Mercedes EQE). Together, these models account for about 26% of the models or 5% of sales in France, according to Transport & Environment.
Carbon Border Adjustment Mechanism
These new rules, which come into effect in France on January 1st, are an example of the kind of measures that Europe will adopt with the implementation of the Carbon Border Adjustment Mechanism (CBAM). The CBAM will heavily tax imported industrial production that emits carbon.
Initially, the CBAM is a mechanism that will primarily affect the production of cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen, along with their carbon emissions. However, as the mechanism is implemented, all industrial production and its transportation are expected to be integrated into the CBAM, which will heavily tax emitted carbon. Clean and carbon-free industrial production will be exempt from any carbon tax.
THIS TYPE OF MEASURE IS A MESSAGE TO THE WORLD THAT EUROPE IS TAKING INDUSTRIAL POLICIES THAT POLLUTE LESS VERY SERIOUSLY.
And if, starting in 2024, cars manufactured in China will be the most affected by France’s anti-pollution rules, by 2030, all types of products and services imported into Europe will be penalized by Europe’s non-polluting industrial policies.
What may result from this?
Analysts from Schmidt Automotive Research state that this strong measure by France on EV prices may also be part of a Macron strategy with the aim of increasing the import costs of EVs to compel Chinese automakers to establish production on the continent.
In reality, Chinese automakers are already making purchases in Europe to find locations for their factories. For instance, Ford is set to sell its assembly plant in Saarlouis, Germany, and BYD is one of the three bidders.
Another point to note is that China still holds a 76% share of the entire global battery production capacity, according to a study by the European Court of Auditors, and Chinese companies are beginning to build battery cell factories across Europe.
This incentive policy introduced by France could be replicated by other European countries. Italy, for example, has already expressed interest in this approach.
