France to condition automotive aid on bringing jobs home

William Horobin and Tara Patel

France plans to attach strings to any injection of public money into its crisis-hit automotive industry, with the repatriation of manufacturing a top priority.

“We are saying to carmakers that we are ready to help you, we are ready to improve bonuses for changing cars, to improve competitiveness of your French sites,” Finance Minister Bruno Le Maire told French television BFM Business on Monday. “The quid pro quo is, what kind of in-shoring are you going to do?”

The minister has repeatedly raised the possibility over the past weeks that France would consider offering incentives toward the purchase of battery-powered vehicles as a way to boost the struggling industry. His comments Monday were the first time he spelled out the demands.

French Minister Bruno Le Maire speaks on the coronavirus measures after the weekly cabinet meeting during a press conference in Paris, Thursday, May 7, 2020.

The global automotive industry has been clobbered by the coronavirus pandemic, which led to factory and showroom shutdowns. As Europe takes tentative steps to reopen economies, reviving the industry is both a political and economic imperative for countries like France and Germany.

In France, where constructor association CCFA estimates more than 2 million jobs depend on the sector, new car registrations fell 89% in April.

Meetings This Week

Executives and industry representatives will meet with Le Maire this week to begin working on a global plan to support carmakers, including Renault SA and PSA Group SA. Talks are expected to center around the government’s fiscal stimulus plans for the fall.

Yet the French state has limited means as the splurge of spending to counter the economic impact of the coronavirus is already expected to inflate the budget deficit to a post-war record. The government is also wary of pouring cash into the car industry if the benefits end up mainly going to foreign suppliers.

“Carmakers must also commit to saying which type of vehicle or type of manufacturing we will bring back to France and that is how we will build a stronger automotive industry,” Le Maire said.

Renault is getting a 5 billion-euro ($5.4 billion) loan guarantee from the state, while PSA has declined this type of government money. In granting billions to carrier Air France-KLM, the government has imposed conditions to make domestic service more environmentally friendly.

Executives of both French carmakers have signaled they would back a plan to encourage electric car sales. Renault is pushing sales of its Zoe all-electric car, while PSA has competing models including the new Citroen Ami.

On Monday, PSA Chairman Louis Gallois suggested a French bonus for electric-car sales be raised to 6,000 euros per vehicle, while a 1,000-euro incentive be offered for hybrids.

“This is a way to encourage sales,” he said on BFM Business radio.

The maker of Peugeot, Citroen and Opel cars said a more general cash-for-clunkers program like what was offered by governments after the 2008 financial crisis would be market distorting.

“No drug, a normal market, and aid for the energy transition,” Jean-Philippe Imparato, who heads the Peugeot brand, told BFM. “We’ll take care of the rest.”

Germany has postponed a decision on a new cash-for-clunkers program, forcing the country’s most important industry to bide its time for any aid package.

Read more: Germany Holds Off on Cash-for-Clunkers Plan Until Early June

Before the pandemic took hold, European carmakers were facing huge pressure to sell electric cars this year or face potential fines. While the industry had already begun to slow, sales of battery-powered cars were growing at a fast clip, although still representing just a fraction of the total.