French Government Demands Automotive Companies Focus on Decarbonization in Exchange for Bailout

French Government Demands Automotive Companies Focus on Decarbonization in Exchange for Bailout

The automobile manufacturing industry is among the economic sectors that have been heavily affected by the COVID-19 pandemic in France. The PSA Group (owner of the brands Peugeot and Citroën) and the Renault Group are the second and third largest automobile producers in Europe. In 2019, the two groups together sold over 7 million cars globally (around 8% of the world total), employed nearly 400,000 people, and had a total revenue of some €130 billion. In France, each group accounts for about 25% of the sales of new passenger cars. The direct employment effect of the industry in France is around 200,000 jobs, and the indirect effect is up to 2.2 million, or 8% of the working population.

Groupe PSA and Groupe Renault Key Figures 2019
  Groupe PSA Groupe Renault
Cars sold (millions) 3.5 3.8
Revenue (billion €) 74.7 55.5
Employees globally 209,000 180,000
Average CO2/km (g) 114.1 115.9

Following the pandemic, the first quarter of 2020 saw PSA Group’s revenues fall by 15.6% and Renault Group’s by 19.2% compared to 2019. The latter, already in financial trouble before the pandemic, has announced reducing up to 15,000 jobs worldwide, 4,600 of which are in France. Renault’s struggles have drawn great public and political attention, as the brand has historically symbolized both post-war national reconstruction efforts as well as painful offshoring measures in transitioning to a post-industrial economy. The French state today continues to own a 15% stake of Renault.

On 2 June, the French government granted the automotive industry loans worth a total of over 8 billion euros, 5 billion of which were to Renault. The loans have three conditions: the companies must commit to increasing their focus on electric cars; they must “respect” their subcontractors; and they most relocalize “technologically advanced” activities to France. What these conditions imply more concretely has not been announced. The Minister of Finance, Bruno Le Maire, has underlined that all state aid to companies must be oriented towards decarbonizing the French economy and improving its competitiveness. Public debate has concentrated mostly on the latter.

Road transport must go electric to meet climate goals

Transport, and especially road transport, constitutes the single highest emitting sector in France as well as in Europe at large. The transport sector makes up 31% of French greenhouse gas emissions. Fuel combustion in transport emits around 134 million tons of CO2 equivalent annually in France, with the average car emitting 1.9 tons. Decarbonizing solutions for road transport therefore play a central role for France to meet its climate commitments.

The car industry overall has been historically poor at decreasing greenhouse gases emissions, but in international comparison, French carmakers have done relatively well. Both the PSA and the Renault group claim among the lowest emissions of CO2/km in Europe. Renault was among the early electric frontrunners in the world; in March it announced an ambitious 2020 objective of increasing the share of electric and hybrid models to 10% of its sales, up from 1.7% in 2019. Both groups may be able to meet the European Union 2021 emission target of maximum 95 grams CO2/km for their vehicle fleets.

However, environmental NGOs have pointed out that the ability of many manufacturers to meet the EU targets has been largely due to flexibilities in the emissions testing system. Meeting the targets will not be enough to meet the goals of the Paris Agreement. Instead, there must be a shift to smaller, lighter, electric cars. In 2018, hybrid cars represented only 4.9%, and fully electric cars 1.4%, of the entire French car stock. These shares have increased over the past decade, but a comparison with SUV models – more expensive and consuming on average about 10% more gas than medium segment cars – illustrates the slow pace of the change: in 2010, SUVs accounted for 9.5% of France’s total car sales, but had reached a 32.8% share by 2017. Despite their high manufacturing emissions, electric cars have a substantially lower long-term carbon footprint compared to petrol and diesel cars. The pandemic bailout is an opportunity for the manufacturers to revamp their activities, to invest more in the development and marketing of electric cars and move away from the production of high-emitting models such as SUVs. The government can press this conversion by defining concrete loan provisions for the companies and by introducing reforms such as the recent law increasing SUV purchase penalties.

Another pressing issue for car manufacturers is to provide data on fuel consumption consistent with real road performance. The diesel emissions scandal of 2014 revealed that many car manufacturers have used software-controlled machinery to manipulate their cars’ consumption and emission data. At the same time, regulatory tests are often too lax, not requiring performance that would reflect real road conditions. For Renault cars, fuel consumption on the road turned out to be on average 40% higher than in test laboratories, while nitrogen oxide (NOx) emissions were up to 11 times higher than in test labs. Also, many of PSA’s models have shown higher NOx emissions in road conditions. Improvements on accurate and true reporting of fuel consumption and emissions must take place quickly.

Activity Rating: **** Moving forward

While the leading French car brands have reached relatively low levels of CO2 emissions per kilometer, the transitioning from combustion engines to electric vehicles must be sped up. The French government is demanding decarbonizing actions from industries that receive bailout packages, including the automotive industry; the question now is how companies’ compliance will be ensured and followed up on.

Take action

Write to the Minister of Finance, Mr. Bruno Le Maire:

Dear Mr. Minister,

Climate Scorecard appreciates that the French Government has obligated businesses affected by the ongoing COVID-19 pandemic to focus on decarbonization in return for state financial aid. Because of the high CO2 emissions share of road transports, we have been particularly observant about loan conditions imposed on the automobile manufacturing industry. We applaud that the Government requires manufacturers to reorient their activities more strongly towards electric cars, and we appeal to you to keep these companies true to their word, with efficient monitoring in place to ensure compliance with the loan conditions. For this purpose, we plead that the Government defines specific and concrete guidelines for the manufacturers to meet and follow.

With our respectful and best regards,

[sign name]

Send Action Alert Message to:

Mr. Bruno Le Maire


This Post was submitted by Climate Scorecard France Country Manager Anna Savolainen

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