Thursday, July 26, 2012

European Auto Industry

The Times looks at Europe's auto industry and sees overcapacity everywhere. Will the French strategy--promoting "clean" cars (hybrids and electrics)--work? It will be costly, with bonuses of up to €7000 euros per car. Montebourg thinks this will be "self-financing" because of the penalties attached to the purchase of highly polluting vehicles, but I'm not sure the arithmetic works out: if the plan is self-financing, it would be effective in stimulating a moribund industry or encouraging a shift to new technologies, and if it isn't self-financing, it will heavily burden the state. Meanwhile, PSA announced huge losses of nearly $1 billion for the quarter.

4 comments:

Kirk said...

That €7000 sounds like a lot. So yesterday, I looked to see what kind of electric cars are availble. I like the idea, and all my driving is in a city, so I don't need a lot of autonomy.

Turns out that for even a compact electric car, it's going to run about €15K after the bonus. A larger hybrid is around €35K. So, you know, fail.

Electric cars are currently 1% of all cars in France. Even if they double that number, it's insignificant. At the current prices, only the well-off can afford them.

Oh, and you pay to "rent" the battery as well...

bernard said...

Art, I fear the €7000 figure is quite misleading, because the subsidy also cannot be more than a percentage of the price of the vehicle. Operationally, the maximum one can hope to get is in reality €2000. It's like with an insurance contract, it's all in the small print...

Kirk said...

Bernard, are you sure about that? Looking at the Renault web site yesterday, they said it was €5000 (which was the previous amount), and this for all models. Perhaps it has changed now?

DavidinParis said...

The idea of a 'rebate' and tax break is great. While it would appear symbolic at the onset, it will help drive the technology forward--sort of like the initial race to the moon in the USA. While it cost 100's of millions, it also created technologies, patents, and approaches that spawned other businesses and gave us new materials for insulation, the pocket calculator, and other such marvels. The major problem is not the idea, nor its costs, but whether France has the guts to take this program to its goal. Alas, it is the latter that is the rub in this proposition and for which I have yet to be impressed.