France Targets 800K EV Sales by 2027, Amid Xi's Visit

Key Takeaway

• France aims to quadruple EV sales to 800,000 by 2027 amid Xi's visit, focusing on sovereignty and supply chain security.
• EU investigates China's EV sector support as France limits cash incentives for non-EU made EVs, highlighting trade tensions.
• Macron and von der Leyen's strategic discussions with Xi aim to "de-risk" EU-China trade relations amidst growing disputes.

France-China EV Pact Amid Trade Tensions

The French government is set to sign a comprehensive agreement with the automotive industry, aiming to significantly boost electric vehicle (EV) sales. This move coincides with Chinese President Xi Jinping's state visit to France, a time marked by heightened trade tensions, particularly in the EV sector. The pact targets a fourfold increase in 100% EV sales to 800,000 units by 2027 and a sixfold rise in electric light commercial vehicle sales to 100,000 units annually. While the agreement does not specify new subsidies, it reaffirms the government's commitment to supporting EV purchases and leases. A notable aspect of the pact is its focus on "ensuring our sovereignty," which includes evaluating supply chains for critical materials essential for EV production.

EU-China EV Trade Dispute

The backdrop to this agreement is the growing concern within France and the European Union (EU) about the potential for Chinese EV market over-capacity to overwhelm domestic industries. The European Commission has initiated an investigation into China's support for its EV sector, reflecting these apprehensions. French Finance Minister Bruno Le Maire emphasized the automotive industry's cultural significance and the challenges posed by international competition, especially from China. The EU-China tensions over EVs are expected to be a central issue during Xi's visit, which also includes discussions with European Commission President Ursula von der Leyen.

Protective Measures and Cooperation

In response to the competitive threat from Chinese EVs, France has implemented measures to limit cash support for EV purchases to those vehicles that meet the strictest environmental production standards, effectively excluding many Chinese-made models. France is also pioneering the use of green tax credits to bolster the emerging battery industry, aligning with new European rules. The agreement further outlines plans for innovation, retraining, supply chain enhancement, and the expansion of the EV recharging network within France. Finance Minister Le Maire's statements reflect a broader European concern for protecting domestic industries and jobs from fierce international competition.

Xi's European Visit and Broader Implications

President Xi Jinping's visit to Europe aims to mitigate the escalating trade tensions that threaten to spark a trade war between China and the EU. His itinerary includes tough trade discussions in France, followed by visits to Serbia and Hungary, where Chinese investment has been warmly received. The visit underscores China's intent to maintain strong relations with Europe amidst challenges, including trade investigations and potential duties on Chinese EV imports. Macron's invitation to Ursula von der Leyen to meet Xi highlights the strategic importance of these discussions, with a focus on "de-risking" Europe's commercial ties with China and addressing the trade deficit.

Management Quotes

• Bruno Le Maire, French Finance Minister:

  "The auto industry is part of our industrial culture and this industry is facing a once-in-a-century change. The transition is difficult, with strong competition from other countries, in particular China, so we need solidarity in the sector." "Europe must adopt a trade policy that protects our industry, our jobs and our technology. I decided to limit bonuses for EVs to cars that respect the strictest environmental norms, quite simply to enhance our production and confront competition that is tougher and tougher, if not ferocious."