The French government will conduct a sweeping review of its auto tax system to revive plunging car sales. As industry complaints have grown that various taxes introduced for the shift to electric vehicles have increased consumer burdens and shrunk the market, the government is moving to adjust the system.
The French Ministry of Trade and Industry (MOTI) on the 11th (local time) convened automakers, retailers and environmental groups for a meeting to assess the impact of the current auto tax regime on the market. According to the Ministry of Trade and Industry (MOTI), new car sales in France from January to May this year fell 0.6% from the same period a year earlier. Compared with 2019, before COVID-19, sales dropped 31%.
France's auto industry has argued that the so‑called "malus" tax, imposed based on vehicle weight and carbon dioxide (CO₂) emissions, is fueling the market downturn. Minister Sébastien Martin of the Ministry of Trade and Industry (MOTI) also said early this year that he would "reexamine the auto tax framework from scratch if necessary," but it remains undecided whether the taxes actually caused the sales decline.
Industry groups have hired consulting firms to analyze how taxes and regulations have affected sales, but results have not yet been released. Opinions also differ within the industry. Antonio Filosa, CEO of Stellantis, which represents France's auto industry, said in an interview with the daily Le Monde that "the ecoscore system, which provides subsidies only for low‑carbon vehicles, is effective."
Environmental groups, by contrast, say the current tax system is actually helping expand EV adoption. According to Le Monde, from January to May this year, electric vehicles accounted for 28% of all new car sales in France. In the corporate fleet market, the EV share exceeded 40%.
The think tank Institute for Mobility in Transition (IMT) also said in a recent report that "it is hard to conclude that a stronger malus caused weak auto sales." Although last year's malus increase added an average of 160 euros per vehicle, vehicle price declines over the same period were larger. In fact, 82% of vehicles sold last year either paid no malus or paid 500 euros or less.
Le Monde also reported that the French government is considering simplifying the complex auto tax system, which is difficult for both consumers and corporations to understand. Company vehicles are currently subject to multiple levies, including a carbon emissions tax, an air pollution tax and a green transition incentive tax, and a plan to consolidate them into a single tax is being discussed.
Meanwhile, the auto industry and environmental groups are said to have largely reached a consensus on reviving the "conversion subsidies (Prime à la conversion)" program, which provides support when scrapping an old vehicle and buying an EV. A plan to include not only new EVs but also used EV buyers as eligible recipients is being considered.