France’s revised EV subsidy scheme could hurt Korean-made cars

[Image source: Gettyimagesbank]

The French government unveiled the final version of its electric vehicle (EV) subsidy scheme, often referred to as the French-style inflation reduction act (IRA). The core principle behind this scheme is to evaluate the eligibility for subsidies based on carbon emissions throughout the entire EV production and transportation processes, effectively implying reduced subsidies for EVs manufactured in East Asia. The move is thus interpreted as an attempt to curb the import of Chinese EVs.

Under the new regulations, the French government will calculate subsidy scores by aggregating carbon emissions in six sectors: steel, aluminum, other materials, batteries, assembly, and transportation. Only EVs scoring a minimum of 60 points out of 80 will qualify for government subsidies.

But the coefficients used to compute carbon emissions differ by region, including the carbon emissions coefficient for maritime transportation, which has faced scrutiny due to its potential discriminatory impact on imported EVs. The coefficient remains unaltered from the initial proposal, possibly placing South Korean automakers at a disadvantage.

The final version of the scheme does include provisions for companies to raise objections if there are disagreements regarding carbon emission coefficients in specific sectors. The French government will review and decide on these objections within two months. In response to the revised scheme, Korea’s Ministry of Trade, Industry, and Energy said that some of the Korean government’s opinions have been partially reflected from the initial draft.

The French Environment and Energy Management Agency (ADEME) will calculate environmental scores for EVs and plans to announce the eligible models for subsidies on December 15. These new regulations will come into effect on January 1, 2024.

The Korean government will closely analyze the specifics of the final version and the impact on Korean companies while engaging in ongoing discussions at both working and high-level levels with the French authorities.