France Maps Out Lower Electric-Car Subsidies Ahead

France will gradually cut hybrid and electric-car subsidies in the coming years, posing risk to a segment that’s growing but remains a relatively small portion of one of Europe’s top auto markets.

The government plans to decrease an incentive to buy electric cars from 7,000 euros ($8,160) this year, to 6,000 euros next year and 5,000 euros in 2022, according to a budget plan unveiled Monday by Finance Minister Bruno Le Maire. The state handout for plug-in hybrid vehicles will be halved to 1,000 euros next year.

A separate incentive for low-income households switching to electric vehicles will be 3,000 euros, lower than the 6,000 euros maximum cash-for-clunkers subsidy that was offered for a couple of months earlier this year.

“We have backed the auto industry while at the same time accelerated the lowering of carbon emissions,” Le Maire said.

Electric vehicles were 6.1% of the French market during the first eight months of the year, according to data from the industry group CCAF, up from 1.9% in 2019. Plug-in hybrids are also capturing a growing market share.

Government incentives in some European countries including France and Germany helped boost car sales earlier this year after lockdown measures to contain the coronavirus sent purchases into a tailspin. The French state’s subsidies particularly affect Renault SA and PSA Group, which rely on the domestic market.

France’s car lobby La Plateforme Automobile criticized the planned drop in incentives, saying they should instead follow the same trajectory as the country’s penalties on high-emissions cars, which are set to rise steeply in the coming years.

“To make the bonus-malus system a true instrument for the environmental transition, the bonus should also progress, otherwise the malus becomes just a disguised new tax,” Marc Mortureux, PFA’s director general, said in a statement.

©2020 Bloomberg L.P.

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