Coronavirus: France sets out €8 billion rescue package for car industry

Government also will offer incentives for people and companies to switch to electric vehicles

President Emmanuel Macron said the plan would defend France's industrial employment. AFP

The French government has set out a €8 billion (Dh32.3bn) bailout for its ailing car industry, which has been hit hard by the coronavirus outbreak.

President Emmanuel Macron has also set out plans to make France the biggest producer of electric cars in Europe.

As part of the plan, €1bn has been put aside to give grants of up €7,000 to help people buy electric vehicles.

This amounts to €5,000 for each company purchase and €2,000 per hybrid rechargeable car. He set a target of France producing a million green cars annually by 2025.

“We need a motivational goal - make France Europe's top producer of clean vehicles by bringing output to more than one million electric and hybrid cars per year over the next five years," Mr Macron said while visiting a car factory in northern France.

He said he wanted to protect France’s “industrial car sovereignty” and that the plan was focused on "defending our industrial employment, which is going to be faced with one of the most serious crises in its history”.

“It is also a plan for the future of the automobile in the 21st century," he added.

Starting June 1, there will be a grant of €3,000 for converting from a petrol-fuelled car to a less-polluting one and as much as €5,000 to upgrade to an electric vehicle.

Mr Macron said that some three quarters of French people would be eligible for the incentives.

By the end of June, around half a million cars will have gone unsold with Mr Macron saying the industry is worth “close to 16 per cent of the revenue of our industrial sector”.

Overall the car industry makes up 4,000 businesses in France and 900,000 employees overall.

The plan was welcomed by industry leaders with Luc Chatel, head of the automobile association, saying the target of one million electric or hybrid cars a year by 2025 was “realistic”.

"This sets out a new ambition for the auto industry in France and responds to the gravity of the situation", he told France Info radio.

"Excluding periods of war, we are going through the most serious crisis in the history of the auto sector," he said.

Mr Macron’s government is in talks with Renault, which it has a 15 per cent stake in, over a €5 billion state loan.

Last week finance minister Bruno Le Maire warned “Renault could disappear” as the pandemic has seen demand for vehicles plummet.

The French economy is on course to contract 20 per cent in the second quarter from the previous three months as the country emerges from a nationwide coronavirus lockdown, according to statistics released on Wednesday.

According to a report in Le Figaro, Renault plans to cut 5,000 jobs by 2024.

A forecast by IHS Markit said global auto sales will drop 22 per cent this year.

The pandemic remains a clear and present danger to the autos sector, with months of uncertainty expected to cloud hopes for global recovery prospects,” said Colin Couchman, executive director, global autos demand forecasting at IHS Markit.