France and Germany: A neck-and-neck race on electric vehicle sales
Actions speak louder than words: the French commitment to electric vehicles
On Christmas Eve, the French government prepared itself an early Christmas present: President Emmanuel Macron promulgated the Loi d’orientation des mobilités, or Mobility Guidance Law, which sets a legislative framework to integrate environmental aspects into transportation policy. With the implementation of the bill two days later, France is now the first country in Europe to put combustion engine vehicle phase-out targets into law. Specifically, it states the intention to end the sale of new passenger cars and light commercial vehicles using fossil fuels by 2040. The legislation is yet another clear signal of the country’s commitment to electric vehicles and provides a pioneering example for other governments.
Various policy measures support France’s ambition to electrify its vehicle fleet. Strong fiscal measures currently in place include: a CO2 based bonus-malus vehicle tax when purchasing a new vehicle, a malus when buying a high-emitting second-hand vehicle, a conversion bonus for scrapping an old high-emitting vehicle in favor of a new or used low-emitting vehicle, and a CO2-based periodic tax on companies and private households for owning a vehicle.
The recent Finance Bill 2020, adopted in the end of 2019, includes an almost twofold increase of the maximum payable malus for new high-emitting vehicles, from a level of €10,500 in 2019 to €20,000 in 2020, as shown in the figure below. The French government also introduced a purchase price cap for vehicles eligible for the bonus payments and created separate systems for individuals and businesses. For individuals, the maximum bonus of €6,000 for vehicles with CO2 emission levels up to 20 g/km, primarily battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs), is maintained but is now capped at a vehicle purchase price of €45,000. The bonus amount is halved to € 3,000 if an individual purchases an electric vehicle which costs between €45,000 and €60,000. For businesses, the maximum bonus is €3,000 if the vehicle’s purchase price is below €60,000. There is no bonus if the purchase price is greater than €60,000, with the exception of light commercial or fuel cell electric vehicles above €60,000, for which individuals and businesses receive a bonus of €3,000.
Also since 2008, the French government applies a malus tax for the purchase of a high-emitting second-hand vehicle. Under current policy, the amount depends on the fiscal horsepower of a vehicle—calculated according to a vehicle’s CO2 emissions and engine power—and ranges between €0 for those with a fiscal horsepower less than 9 and €1,000 for vehicles with a fiscal horsepower more than 14. The tax is reduced by 10% per year from the date of a vehicle’s initial registration. For example, the purchase of a three-year-old second-hand Volkswagen Touareg would be subject to a malus of €700. In comparison, the maximum malus of €1,000 would apply for the same vehicle if it was less than a year old.
The conversion bonus, introduced in 2015, is another important component of the French government’s efforts to electrify the country’s vehicle fleet. The conversion bonus applies to both new and used vehicles that emit less than 117 g CO2/km and whose purchase price does not exceed €60,000. To obtain the conversion bonus, an older vehicle must be scrapped. This includes diesel vehicles over 18 years old (registered for the first time before 2001), over 13 years old (registered before 2006) if the reference tax income of a person is equal or less than €13,489, or a gasoline vehicle over 22 years old (registered before 1997). Under the current policy, the conversion bonus can be as high as €5,000 under certain conditions, such as being a low-income household and purchasing an electric vehicle with emissions no more than 50 g CO2/km.
In addition to the bonus-malus measures on car purchase, the French government applies periodical taxes for owning a vehicle. Unlike other countries, France differentiates between private households and companies, with companies paying significantly higher taxes for owning a vehicle. In 2019, about one-third of cars in France were registered by companies. Companies owning electric vehicles are exempt while annual ownership taxes for a gasoline or diesel-powered vehicle can be as high as several thousand euros per vehicle. A surcharge depending on the engine type and the year the vehicle was first registered is added to the amount. For example, a company owning a diesel vehicle emitting 150 g CO2/km and registered in 2005 is subject to an ownership tax of almost €2,400 per year. In contrast to companies, annual ownership taxes for private households are negligible, at €160 and only apply to cars with emissions more than 190 g CO2/km.
To encourage the deployment of electric vehicles, the French government has secured significant funding for various policy actions over the next several years. One example is the budget for the ecological bonus. In 2019, €264 million was allocated to the bonus to support the purchase of almost 42,800 electric passenger cars and almost 8,000 electric light commercial vehicles. In 2020, the government will provide €395 million with a view to support the purchase of about 100,000 electric vehicles. According to current plans, the same amount will be budgeted for 2021 to subsidize more than 130,000 vehicles and will slightly be reduced to €340 million in 2022 to financially support the purchase of 160,000 vehicles. As it is assumed that purchase prices for electric vehicles will drop, the French government intends to reduce the ecological bonus in the upcoming years to a maximum bonus of €5,000 in 2021 and € 4,000 in 2022. Even with this reduction, France still provides one of the highest bonus amounts for the purchase of a new zero-emission vehicle in Europe.
Overall, the French government is implementing policies to accelerate the electrification of the country’s vehicle through its system of taxation and financial incentives. Further national actions complement these policies, such as the continuous expansion of the electric charger network and the procurement of electric vehicles in public fleets, likewise guaranteed by the necessary regulations and future funding.
As a result, France has one of the cleanest new vehicle fleets across Europe: in 2018, the average new passenger car in France emitted 111 g CO2/km based on NEDC, well below the European Union’s 2018 average of 120 g CO2/km and Germany’s average of 128 g CO2/km. At the same time, new electric passenger car registrations (BEVs, FCEVs, PHEVs) in France accounted for 2.0% in 2018, the same share as in the European Union and Germany. The most recent data for 2019 show that average CO2 emissions of new passenger cars in France remained constant at 111 g CO2/km, while the share of newly registered electric passenger cars increased to 2.8%.
The latest progressive actions by the French government, particularly significantly increasing taxes on high-emitting vehicle purchases, are setting the stage for the planned end of fossil fuel-burning cars in the country. Not only are these decisions laying important groundwork for future policymaking within the country itself, but they can also serve as a best-practice example for other countries in Europe and worldwide.