France’s Electric Dreams: France invests in production of E-cars

June 16, 2020

2 min read

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What's going on here?

The French government has just injected more than €8 bn into its car industry (of which €5 bn is a loan to Renault) to keep it afloat amid the losses it has suffered as a result of COVID-19. One goal of this cash injection is to support production of 1m electric cars in France by 2025.

What does this mean?

France’s plan involves making a €5 bn loan from the government to Renault and offering subsidies to consumers to encourage them to change their existing cars to lower emission models, including a €7,000 contribution for each electric car purchase. In addition to assisting production of 1 million electric cars, the plan also requires Renault to keep at least two key factories open to save jobs. 

Renault needs the loan as it has been having a string of issues in recent history, with the 2018 arrest of its star CEO Carlos Ghosn over allegations of false accounting endangering the Renault-Nissan-Mitsubishi alliance (the “Alliance”) and the current Coronavirus pandemic affecting sales. With the loan, France aims to revive and transform its car industry and make the country number one for electric vehicle production in Europe.

What's the big picture effect?

France’s injection likely had 3 main goals: 

  1. To maintain the Alliance by reassuring Nissan and Mitsubishi that Renault will remain afloat in the current climate; 
  2. To maintain jobs for French auto workers as much as possible; and 
  3. To futureproof France’s auto industry for the post-COVID-19 world. 

France has succeeded in their first goal: on May 30 2020, the three carmakers reached an agreement regarding the Alliance and announced that the Alliance was still in place (see an article on it here). 

France also seems to have managed to maintain the jobs in its auto industry. By accepting the loan from the government, Renault must satisfy the loan condition that requires it to keep two French factories open and is therefore unlikely to close down.  Renault still plans to perform cost-cutting measures (which will cut around 15,000 jobs worldwide, including 4,600 in France), but this is preferable to Renault going bankrupt and having to cut all its jobs. 

However, whether France will be able to create an auto industry that is ready for the future after COVID-19 remains to be seen. Renault is the 2nd largest European maker of battery-powered and plug-in hybrid cars after Germany’s BMW, but both of their sales are dwarfed by Tesla. It will be an uphill battle if France wishes for Renault to dethrone Tesla or BMW, when neither of them will be taking their foot off the pedal either.

Report written by Zachary NG

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