Paris At the Paris Motor Show last October, the newcomers from China were looking for the big stage: while many established car manufacturers stayed away from the fair, Chinese electric car manufacturers such as BYD and Great Wall Motors presented their models in the French capital.
Emmanuel Macron was already concerned back then: “We have to wake up,” warned the French President. The European Union, “the most virtuous region when it comes to climate protection,” must give preference to its own auto industry. After all, the US and the Chinese would do the same. A “Buy European Act” is needed.
But the European partners did not take up the demand, and Berlin in particular rejected Macron’s far-reaching ideas for a defensive, protectionist industrial policy. Seven months later, the French head of state pushed ahead at national level and announced that the French purchase premium for electric cars would in future be dependent on CO2 emissions during production. Vehicles manufactured in China would therefore be effectively excluded from this subsidy.
“We will be the first European country to reform the criteria for promoting electric cars,” said Macron. “It’s a small revolution.” In the future, the grants are to be paid out “more specifically” in order to strengthen the production of battery cells and electric cars in Europe. The President warned: “We must not make the same mistakes as in the solar industry,” which was massively promoted in Europe and then migrated to China.
In his speech to around 400 business representatives on Thursday, the President presented the cornerstones of a law to promote “green industry”. The production of electric cars is of particular importance for Macron.
More gigafactories are to be built
On Friday he will travel to Dunkerque in northern France, where another “Gigafactory” for battery cells is to be built. From the President’s point of view, Chinese competition not only poses a threat to the future of European automakers, but also to his ambitious plan to reindustrialize the country.
The French government was uneasy about the fact that 40 percent of state subsidies for the purchase of an e-car in the first quarter of the year went to vehicles imported from China.
The French state subsidizes the purchase of a fully electric car with 5000 euros. However, the support is only paid for vehicles that cost less than 47,000 euros. So far, in France, as with the German environmental bonus, it was irrelevant which country and which manufacturer the subsidized electric car came from.
Macron’s industry law, which is to be passed by the cabinet in Paris next week, will introduce the emissions caused by the production of electric cars as a criterion.
Details on the question of what the reformed bonus will look like and when the funding will end are not yet known. But one thing is certain: China, which produces 60 percent of its electricity from coal, will not meet the criteria.
Burner ban in the EU
In the Élysée Palace, reference is made to the ban on combustion engines in the EU: Europe has decided not to allow any new cars with diesel or petrol engines from 2035 and is investing heavily in decarbonization.
“The question that arises in view of this very strong commitment is whether support measures continue to finance cars and production from countries that do not respect our rules,” said a Macron adviser.
It is important that climate-friendly energies are also used in the construction of electric vehicles. “The worst thing would be to import products from countries whose energy supply still causes a lot of CO2.”
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This is where the French government steps in to avoid the move being classified as an illegal trade barrier. Because with the restriction of subsidies for electric cars, which is obviously directed against China, Macron not only risks trouble with the World Trade Organization, but also competition law objections from the EU Commission.
In French government circles, the “Net Zero Industry Act” presented by the Commission in March is cited as a possible legal basis. The EU has set itself the goal of producing 40 percent of the annual demand for clean technologies itself by 2030.
Can the project be properly implemented under European law?
In the federal government, on the other hand, there are doubts that the project can be properly implemented under European law. Macron’s proposals sometimes “take some getting used to,” said those close to Chancellor Olaf Scholz (SPD).
Berlin also suspects that the French President’s wish for the EU to confidently position itself as the third economic and geopolitical power bloc next to the USA and China in the 21st century is behind the plans. Scholz, on the other hand, relies on the closest possible transatlantic relationship. He doesn’t want to give the impression that the EU sees the US and China as equal rivals.
However, the effects of the legislative proposal from the Élysée on the major German car manufacturers are likely to be minor. Because most of the production is located locally in Europe. For example, Germany’s largest carmaker VW produces almost exclusively in China for China. Only with the Tavascan model from the sporty Seat brand Cupra does the group deviate from this line for the first time and is also marketing a car produced in China in Europe.
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Although components such as the batteries in electric cars in many cases come from Chinese manufacturers, some of these are also manufactured in Europe. Market leader CATL is planning a battery cell factory in Hungary together with Mercedes, and the company is also ramping up production at a plant in Thuringia. The US manufacturer Tesla, which has its Model 3 sold in Europe manufactured in Shanghai, could be more affected.
Focus on the needs of the French automotive industry
With his initiative, Macron is focusing in particular on the needs of the French auto industry, for which the Chinese market is of little importance compared to the large German manufacturers.
Renault wants to become a purely electric car brand in Europe by 2030. The international car group Stellantis, home of the traditional French brands Peugeot and Citroën, also sees competition from China as a problem.
At an industry event in Bochum, Stellantis boss Carlos Tavares recently warned against the automotive industry moving to the Far East.
The CEO, whose responsibilities also include brands such as Opel, Fiat and Chrysler, said: “The key question is: can we attack in Europe with a business model and pricing structure that differs from that of the Chinese competition? Or do we necessarily have to adapt to these cost structures” – which would mean price dumping and, as a result, threaten the importance of local industrial production.
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If nothing changes, says Tavares, “in ten years we will be serving Chinese and American tourists coffee,” and other sectors of the economy would be dead. In his sector, however, this should lead to individual mobility becoming “significantly more expensive” in Europe in the future. This in turn drives inflation. “It’s a difficult cycle.”
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