France Reduces Funding for Electric Cars Made in Asia

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【Summary】France has implemented new subsidy criteria for electric vehicles, which will exclude cars made outside the EU starting from January 1st next year. The aim is to exclude Chinese carmakers, who are increasing their market share with cheap models. However, this measure affects all Asian manufacturers, including Korean EV makers.

FutureCar Staff Sep 21, 2023 4:15 PM PT

France Reduces Funding for Electric Cars Made in Asia

France has introduced new subsidy criteria for electric vehicles, aiming to exclude cars made outside the EU starting from January 1 next year. This move is seen as an indirect way to prevent Chinese carmakers from increasing their market share in France with their low-cost models, but it also affects all Asian manufacturers, including Korean EV makers.

The French Ministry of Economics and Finance announced that the new criteria will consider the carbon emissions generated during the production and transportation of electric cars, based on their country of origin. This means that buyers of electric vehicles in France can no longer benefit from a cash incentive of up to 5,000 euros if they choose Korean EVs.

One of the reasons behind this decision is the significantly higher carbon emissions associated with Korean-made car chassis compared to those from North America, Europe, and Japan. Korean car chassis produce 18.5 kg of carbon emissions per 1 kg of aluminum, while the figures for North America, Europe, and Japan are 8.5 kg, 8.6 kg, and 12.6 kg, respectively.

In addition to car chassis, the carbon emissions for key components of electric cars, such as batteries, are also higher for Korea compared to Europe, Japan, and China. Korea produces 63 kg of carbon emissions per kilowatt-hour for batteries, similar to Japan's 67 kg and China's 68 kg, while Europe's figure is 53 kg.

Furthermore, the transportation of finished cars to their destination is more disadvantageous for distant Asian countries, including Korea. For example, in rail transport, Asian countries are assessed at 0.041 kg per ton per km, whereas France is rated at 0.01 kg and other European countries at 0.023 kg.

The exclusion of Asian electric cars from France's subsidy scheme has caused concerns among Korean carmakers. Hyundai, one of the leading Korean car manufacturers, sold 16,655 electric cars in France last year, with only 40 percent of them produced in Europe. In response to this, Korean carmakers plan to increase the proportion of electric car production in their European factories, which currently stands at only seven percent.

The Ministry of Trade, Industry and Energy in Korea has stated that it will continue negotiations with the French side to minimize the burden on Korean companies. The Korea International Trade Association has also expressed deep concerns, warning that France's new subsidy scheme might violate free trade agreements between the two countries that prohibit discriminatory treatment.