France to Subsidize Green Car Purchases

With Europe's second-largest carmaker, PSA Peugeot Citroen, cutting jobs and posting record losses, the French government unveiled a raft of measures aimed at promoting green cars.

The plan is two pronged – aimed not only at rewarding companies delving into green technology, but also consumers who purchase green cars.

Measures include raising the subsidies on buying electric cars from to a maximum €7,000 euros ($8,500) from €5,000 euros at present, 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.

The government is planning to pay out around €500 million in such rebates during 2013.

Despite existing incentives, EVs and hybrids accounted for only 0.2 percent and 0.8 percent respectively of new-car French registrations in the first quarter.

The French car industry has made some inroads into producing greener cars in recent years, with PSA diesel-electric 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 Prius, Auris and Yaris models.

The subsidies may also benefit Mitsubishi, which makes electric minicars for itself as well as for the Peugeot and Citroen brands, and Renault which already sells electric Fluence Z.E. sedan, Kangoo Z.E. van and the Twizy two-seater.

The French auto industry has taken a heavy hit – shrinking from 3.5 million vehicles in 2005 to just 2.2 million last year. Industry employment is down to 800,000 – a 30 percent drop in seven years.