France to lower EV grants and increase emissions penalty

29 September 2020

29 September 2020

The French government is to decrease its standard electric-vehicle (EV) grants over the next two years while reducing the threshold for the environmental ‘malus’ (penalty) and increasing the penalty ceiling.

The current battery-electric vehicle (BEV) grant of €7,000 for private buyers will continue to the end of 2020, before reducing to €6,000 in 2021 and €5,000 in 2022, according to a plan unveiled by finance minister Bruno Le Maire. Incentives for plug-in hybrid (PHEV) models will also be halved, from €2,000 in 2020 to €1,000 from 2021. Households with a low income will receive an additional €3,000 towards a BEV model under the plans.

Necessary timing

The move to lower grants for EVs will be a blow for the automotive industry in France at a time when the sale of BEVs, in particular, is crucial. With strict EU CO2 emissions targets to meet in 2021, carmakers are keen to sell as many BEVs as possible to reduce fleet averages. The post-coronavirus (COVID-19) lockdown financial scheme announced by the French government in June helped sales of BEVs increase 114% in the first half of 2020 compared to last year. This was later amended when the financial cap was reached.

‘We have supported the automotive industry to the tune of €8 billion, notably by massively increasing the ecological bonus for the purchase of electric and hybrid vehicles and the vehicle conversion bonus,’ Le Maire said.

‘These demand support measures have been successful. In June and July, 520,000 vehicles were sold in France, 25% more than in the same period in 2019. Market share of EVs has almost quadrupled, rising from 1.8% in 2019 for private vehicles to 6.1% in 2020. Nearly 55,000 electric vehicles have been sold since the beginning of the year,’ he added.

Gradual change

However, the decrease over the next two years still provides a generous grant scheme, while also ensuring that the country can ‘wean’ consumers off taxpayer help when purchasing a BEV or PHEV model. With an increasing number of models being launched by carmakers, strives forward in technology and the shortening of supply chains, it is likely that prices of BEV models, in particular, will begin to drop in that timeframe.

By lowering incentives in line with potential price decreases, the government is also ensuring it does not back itself into a corner when it decides to lift the grant-scheme completely. With the country planning to ban the sale of internal combustion engine (ICE) vehicles in 2040, it does not want to be in a position where it is funding the sale of every new-vehicle purchase.

A similar situation was seen in Norway, which leads the world in BEV sales when the population is taken into account. A decision to increase taxes on heavier BEVs was scrapped in 2017 amid protests from drivers who had bought such models under the promise of tax breaks and other incentives.

Penalty increase

The government also suggested it will set a new scale for the CO2 malus on vehicle sales, which it says will include a ‘lowering of the threshold and a gradual increase in the ceiling.’

It will also continue implementation of new methods for determining CO2 emissions that were introduced by the Finance Act 2020, which serve as a basis for several taxes placed on the registration or use of vehicles.

Buyers of vehicles that emit 138 grams per kilometre of CO2 on the WLTP scale are currently subject to an escalating penalty that is capped at €20,000 for the highest emissions vehicles. 

According to French newspaper Le Monde, under the budget proposal, the limit would fall to 131g/km in 2021 and 122g/km in 2022. At the same time, the maximum penalty would increase to €40,000 in 2021 and €50,000 in 2022.  A vehicle emitting 153 grams (a large SUV or a petrol minivan) would, from January 2021, be subject to a penalty of €1,000 from January 2021, compared to just €400 at present.