France deploys $8.8 billion to rescue ailing car industry

France’s government is injecting more than €8 billion ($8.8 billion) to save the country’s car industry from huge losses wrought by virus lockdowns, and wants to use the crisis to make France the No. 1 producer of electric vehicles in Europe.

Starting next week, consumers can get up to €12,000 from the government for buying an electric car under the “historic” plan unveiled Tuesday by President Emmanuel Macron.

“Our country wouldn’t be the same without its great brands – Renault, Peugeot, Citroen,” Macron said, decrying an “unprecedented crisis” for the industry that has seen production plunge more than 90 per cent in France alone.

Carmakers and governments around the world are grappling with similar losses. Politicians are divided over whether and how to bail out an industry that already won billions in government support a decade ago after the 2008 financial crisis – and that was already facing major new costs and disruption with growing demand for autonomous and cleaner cars.

Macron’s €8-billion plan does not include a €5 billion French government loan guarantee under discussion for struggling Renault, or the millions the government has already spent on temporary unemployment payments to auto workers told to stay home for weeks to keep the virus at bay.

The new plan includes government subsidies to encourage consumers to scrap their old cars and buy lower-emissions models, and longer-term investment in innovative technology. Macron set a goal of producing one million electric cars in France by 2025.

“Our country should embody this avant-garde,” he said. “We need not only to save (the industry) but transform it.”

French unions blockaded a Renault plant in western France on Tuesday, fearing fallout from the virus could lead to widespread job losses and factory closures. Bailouts a decade ago included a government bonus plan that encouraged consumers to buy newer cars, though that didn’t prevent thousands of job cuts.

Renault is expected to announce a $2.2-billion cost-cutting plan to unions this week, and Macron said that the Renault loan guarantee is contingent on keeping open two key French factories.

Macron met with industry representatives and unions at the Elysee presidential palace on Tuesday morning, then announced the investment plan on a visit to supplier Valeo, which makes equipment for electric cars, at its factory in northern France.

France’s auto industry employs 400,000 people and is a big part of its manufacturing sector, but shuttered showrooms and suspended production as the virus swept across the country in March. The country started easing restrictions on May 11.

AP