With France’s biggest car manufacturer, PSA Peugeot Citroen, cutting jobs and posting record losses, the French government responded to the crisis in the auto sector Wednesday by unveiling a raft of measures aimed at promoting green cars.
The French government went on the offensive to restore its crisis-hit auto industry Wednesday with a raft of measures aimed at supporting the production of environmentally friendly cars.
With France’s biggest car manufacturer unveiling a record first-half loss of €819 million the same day, the new measures could not come at a better time.
PSA Peugeot Citroen, which is also Europe’s second largest carmaker, has already announced some 8,000 job cuts in France as part of a much-criticised cost-reduction plan worth €1.5 billion over the next three years.
Gambling on 'green'
The government’s policies are a gamble that the future of the auto industry lies in all-electric and hybrid vehicles – with its new measures an attempt to make greener cars more attractive to consumers and to develop the industry in France for the global market.
“This government is determined to see the automotive industry recover,” said French Prime Minister Jean-Marc Ayrault, who called the plans “extremely ambitious”.
Measures include raising the subsidies on buying electric cars from €5,000 to a maximum €7,000 euros, and from €2,000 to €4,000 for hybrids.
These subsidies are designed to help manufacturers offset the higher cost of more environmentally friendly cars and thus make them more competitive. Inversely, existing penalties for heavily polluting cars will be increased.
Announcing the measures, French Minister for Industrial Renewal Arnaud Montebourg said 25% of all vehicles bought by the government would also now be electric or hybrid.
Investment credits (the government injected some three billion euros into the industry in 2009) will also be extended for the sector under the new plans.
‘Piecemeal’ government plan
The new measure, however, have been dismissed as modest by many industry insiders considering the scale of the sectors problems. Guillaume Cairou, head of leading French management consultancy Didaxis, told FRANCE 24, “The real problem with France’s auto industry is the high cost of employment. The government’s plan is piecemeal, does not focus on the long term and is not what the industry needs.”
Cairou also argued that the French state had to take some of the blame for the industry’s woes, arguing that investment credits had allowed car manufacturers to rest on their laurels while real innovation took a back seat.
Cairou said PSA – and the industry as a whole – needed to change its strategy, be less reliant on government handouts and above all “develops its standing in foreign markets and show that French leadership in the automotive sector is still possible.”
While the government wants to be seen to take the initiative, there are still significant hurdles in the way of an automotive green revolution.
This is particularly the case with all-electric cars, according to the government-sponsored IFP Energies Nouvelles [renewable energy] institute.
Electric chicken and egg
“It is the age-old problem of the chicken and the egg,” the body says on its website. “Without a sufficient number of recharging points, consumers will not be interested in buying electric cars. And without a critical mass of electric cars, there is no reason to install the recharging points.”
The French car industry has made some inroads into producing greener cars in recent years, with PSA’s hybrids now accounting for some 24% of those sold in France. However, this is still well behind Toyota, which has 36% of the market with its Aurius and Prius brands.
But the French market for hybrid cars remains sluggish.
French-made hybrids account for just 1% of the global market – which has doubled worldwide from around 500,000 in 2008 to more than a million in 2011.
With the French auto industry in the doldrums, the government has an uphill struggle persuading domestic consumers to “go green” while encouraging the innovation and leadership needed to improve its exports.
It remains to be seen whether the government’s steps will be enough to boost its diseased, but prized, auto sector.
Date created : 2012-07-25