French Car Plan: Climate Madness and Market Folly

July 31st, 2012
in Op Ed

by Hilary Barnes, Euro Politico Twitting

France's government plans to save the fortunes of the flagging French auto industry by persuading it to produce cars that cannot be sold on Citroen-C-Zero-Electric-CarSMALLcommercial terms in any known market by increasing the subsidy on every electric car produced from €5000 to €7000 and on hybrids from €2000 to €4000.

This appears to compound climate madness by a policy of industrial delirium.

The minister for bankrupting industries, er, sorry, read 'industrial redresssement', was reported as describing this as “enabling the French to acquire low cost cars without increasing the household's debt.”

Click on picture for larger image of Citroen C-Zero Electric car.

Follow up:

If the households do not pay, who does? The state? No. The state is the intermediary only. Correct answer of course: the lucky taxpayers, all those householders who do not exploit the offer of a car with a €4,000 or a €7,000 subsidy.

So here we have a deeply indebted government, that is committed to slashing the government budget deficit by about 1.5 percentage points of GDP in between 2012 and 2013.  This means the economy is more likely to shrink than to grow next year (but not according ton the official forecasts, naturally), and which now plans to save the auto industry by adding significantly to the budget deficit.

The French auto industry has made its reputation by selling about half the vehicles it produces in countries other than France. Yet such is the strategic brilliance of the plan that not one of the vehicles produced will be marketable outside France, or not unless they match the French subsidy.

It is unbelievable that anyone in the French administration, or even Peugeot's shop stewards demonstrating outside the group's head office in Paris today, can image that a plan the builds on reviving the auto industry by a policy of autarky in a globalised world has the slightest chance of success.

The only way to revive the French industry is for the French industry to improve its competitiveness. For Peugeot this means initially a plan to cut costs, partly by reducing the headcount. Making unmarketable cars is the antithesis of improving competitiveness.

Incidentally, despite government pressure, Peugeot's in its half year financial statement last week, maintains it programme for reducing employment in France by 8,000 over the next 18 months or so

And where does climate madness come into it, you ask. Well, one of the government's justifications for the plan is that it will reduce CO2 emissions.

I happen to agree with those scientists who argue that the costs of trying to curb C02 emissions far outweigh the tiny, almost imperceptible impact that measures such as those agreed at the Copenhagen Climate Conference might have on the likely increase in the global temperature.

Growing realisation that this is indeed the case must surely be a factor behind the meagre results of the Durban and Rio climate conferences this year.

For one statement of this case, see Christopher Monckton here.

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About the Author

Hilary Barnes is a veteran economics and business writer.  He was for 25 years the Copenhagen Correspondent of the Financial Times, Nordic Correspondent of The Economist for part of that time, and published a paper newsletter, sold to international companies in the Nordic countries, called The Scandinavian Economies for over 30 years.

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