France Slashes Subsidies for Asian-Made Electric Cars

France has introduced stringent new subsidy criteria for electric vehicles to freeze out cars made outside the EU from Jan. 1 next year.

The French Ministry of Economics and Finance on Wednesday said the new criteria quantify the carbon emissions generated during the production and transportation of electric cars by their country of origin.

The aim is to indirectly exclude Chinese carmakers, which are rapidly increasing their market share there with cheap models, but the measure affects all the Asian manufacturers including Korean EV makers.

Buyers of electric vehicles in France are eligible for a cash incentive of up to 5,000 euros, but Korean EVs will now be unlikely to benefit.

The carbon emissions of Korean-made car chassis are significantly higher at 18.5 kg per 1 kg of aluminum than those of cars from North America (8.5 kg), Europe (8.6 kg), and Japan (12.6 kg).

The carbon emissions for key components of electric cars such as batteries are also higher for Korea at 63 kg per kilowatt-hour than Europe's 53 kg, and similar to Japan's 67 kg and China's 68 kg.

The carbon emissions associated with transporting finished cars to their destination are naturally more disadvantageous for distant Asian countries. For example, in rail transport, Asian countries are assessed at 0.041 kg per ton per km, whereas France is rated 0.01 kg and other European countries 0.023 kg.

U.S. news outlet Politico quoted French authorities as saying that "most electric cars produced in Asia are likely to be excluded from France's electric vehicle purchase subsidy scheme as of next year as Paris looks to clamp down on EVs from China."

This has raised concerns among Korean carmakers as well. Hyundai, for instance, sold 16,655 electric cars in France last year, ranking fifth in the market, but only 6,571 of them or 40 percent were produced in Europe.

They have plans to increase the proportion of electric-car production in their European factories, which currently stands at only seven percent, and if this French version of the U.S.' protectionist Inflation Reduction Act expands to other European countries, local factory expansion may become an urgent priority.

The Ministry of Trade, Industry and Energy here said it will "continue negotiations with the French side to minimize the burden on Korean companies."

The Korea International Trade Association has expressed deep concerns, warning that France's new subsidy scheme might violate free trade agreements between the two countries that prohibit discriminatory treatment.