[Insights] Protecting the EV Industry: France’s Latest Incentives May Exclude Chinese Electric Car

2023-10-12 Emerging Technologies editor

On September 20, 2023, France unveiled new incentives for purchasing electric vehicles, offering cash subsidies ranging from €5,000 to €7,000 for qualifying models. The subsidy criteria now take into account the carbon footprint during both the electric vehicle and battery manufacturing processes.

Given that China’s electric vehicle production relies more on coal-fired power generation, there’s a strong possibility that Chinese-made electric cars may not qualify for these subsidies. The French government plans to announce the list of eligible models in December 2023.

TrendForce’s point:

  1. EU’s Swift Action Needed to Safeguard European EV Industry

French President Macron expressed concerns right after the EU initiated a 13-month preliminary anti-subsidy investigation against China in September 2023. He believed that the current subsidy policy, which offers €5,000 for electric cars weighing less than 4.7 tons, could potentially boost the sales of Chinese-manufactured electric vehicles in Europe. The extensive media coverage of Chinese automakers’ significant presence at the Munich Auto Show in Germany further intensified the pressure from within the EU, leading to the EU’s decision to conduct an anti-subsidy investigation against Chinese electric vehicles.

The production of an electric vehicle involves a variety of components, with midstream and upstream suppliers, equipment manufacturers, and labor relying on the entire industrial ecosystem. If the future market is dominated by Chinese-imported cars, the impact won’t be limited to European car manufacturers but will reverberate throughout the entire electric vehicle industry. Thus, not only France and Germany but also Italy may consider revising its electric vehicle subsidy regulations. This shows that the EU is aligning towards a preliminary consensus on the anti-subsidy investigation.

  1. EU Should Master Battery Tech for Cost-Effectiveness besides protecting Domestics through Policy

Chinese battery manufacturers command a global market share exceeding 60%, allowing them to cover the entire battery production chain, share production costs, and continually advance new technologies. Since batteries represent approximately 40% of the total vehicle cost, Chinese electric cars offer superior cost-effectiveness. However, despite this advantage, securing a substantial share in the European market, where well-established European automakers dominate, remains uncertain.

The EU initiated the anti-subsidy investigation against Chinese electric vehicles even before they achieved significant results. While this can bolster their position in economic negotiations between the two parties, it underscores the necessity for policy protection to maintain market competitiveness for European car manufacturers.

Chinese electric vehicle manufacturers are not only might consider adhering to European and American subsidy criteria for manufacturing facilities but also exploring regions with abundant battery raw materials, such as Southeast Asia, Central and South America, and Africa. If China uses electric vehicle technology as leverage to gain control over vital resources in these regions, it will affect the plans to enhance the autonomy of the electric vehicle battery industry in Europe and the United States.

In recent years, China and Europe have fostered close collaboration in electric vehicle technology. For instance, Volkswagen announced a €1 billion investment to establish a research and development center in China in April 2023; Audi also partnered with SAIC to jointly develop the Chinese market. This indicates that both sides hold high expectations for expanding their markets respectively. In consequence, it is worth monitoring whether, in the forthcoming 13 months, they will reach a consensus through negotiations.

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