French Tax on Inefficient Vehicles Riles Automakers

Next year, the European Union plans to adopt aggressive new rules that would see automakers fined if their total annual vehicle sales exceed predetermined carbon limits. Obviously automakers aren’t thrilled with the new fines and higher emission mandates, but France is facing additional criticism for its decision to take things a step further.

France’s parliament has adopted a new law penalizing cars that emit carbon dioxide above a certain threshold while still adhering to EU regulations. Vehicles failing to adhere to the French rules will be subject to a 20,000 euros ($22,240) tax in 2020, nearly twice the current fine. Meanwhile, the country is mulling the possibility of culling EV incentives — an odd move, considering its aim to transition its populace to zero-emission vehicles.

As SUVs tend to be bigger polluters than, say, a city car that’s half their weight, they’re likely to be the most impacted by the new rules. According to Bloomberg, about one third of France’s new auto sales currently stem from crossovers and sporty utility models.

From Bloomberg:

The measures will impact SUV prices. SUVs are among the most polluting passenger vehicles because they are heavier and less fuel efficient. Despite this, they are popular, making up 30 percent of sales in France in the first 11 months, according to Paris-based consultancy Inovev. While electric-car sales are growing quickly, they still make up a tiny proportion of the overall market.

The measures have come under fire from the French industry.

“It’s a double penalty for consumers,” Luc Chatel, head of French automotive organization PFA, said in a statement, which called the policy “incoherent.”

“The electric-car market won’t take off without strong purchasing incentives,” Chatel said. “Everyone has something to lose: The industry, the environment and the purchasing power of the French.”

With more money coming in from models more prone to producing air pollution (via taxes), one would presume France could afford to continue subsidizing electric vehicles. Doing so isn’t cheap. It’s estimated that France’s EV subsidies cost the nation about 550 million euros last year. The French finance ministry figures its new SUV penalty could yield around 50 million euros in revenue per year in revenue, money that will apparently be used to help the automotive industry transition toward cleaner vehicles. But, as you can see, it is nowhere near enough to offset the cost of providing electric vehicle incentives.

Those subsidies will remain in place, undergoing some moderate changes. For 2020, France will offer as much as 6,000 euros toward the purchase of an electric car — so long as the vehicle costs less than 45,000 euros. This is being done to help reduce criticism that EV subsidies are basically a tax break for wealthy early adopters; the price cap is right on the edge of what a bare-bones Tesla Model 3 might cost in Europe.

That makes all of this a little more complicated than simply assuming France has no idea what it’s doing. Public sentiment increasingly frames EV subsidies as being anti-competitive, clogging the free market by propping up models chosen by the government — rather than consumers. France hopes to wean the public off EV subsidies by reducing the maximum payout over the next few years. Of course, it’s also praying they’ll be able to stand on their own by then.

Unfortunately, plenty of uncertainties persist. After 2030, European carmakers must achieve average vehicle emissions of just 59 grams of CO2 per kilometer (which translates to about 105 miles per gallon, if you’re driving a diesel) to avoid penalties. Many claim the rule basically forces automakers to shift away from internal combustion motors entirely. Gas burners probably cannot reach this target without customers making major sacrifices in terms of size, weight, and power. That leaves EVs, which burn their CO2 at battery/auto factories and power plants.

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