French government to provide 8 billion euros to help revive their car industry

The president of France, Emmanuel Macron, announced this week a fiscal stimulus of €8 billion to help the French car industry. His government are hoping that the cash injection will not only help domestic auto manufacturers survive the current crisis, but also emerge stronger and more competitive in global markets.

Under the €8 billion plan, there will be a large focus on stimulating the French market for electric and hybrid cars. This includes generous subsidies, financial support for research into hydrogen powered cars, as well as a boost to a multibillion euro project to shift the production of electric batteries away from China and South Korea, and into French factories instead.

The president has long promoted the idea of industrial autarky in Europe, where European manufacturers of all kinds of products are less reliant on importing components from outside the EU.

The fiscal package will help the French auto giant Renault in particular, with €5 billion of aid being allocated to help them recover from the hefty financial impact that the Covid-19 lockdown has had on their sales.

The French auto-industry is world renowned and directly employs over 400,000 people. With the income dependence of such a large number of French workers as well as the national pride associated with the industry, it is no surprise that the French government is so driven to protect it.

THINK LIKE AN ECONOMIST!

Q1. What is meant by the term fiscal stimulus?

Q2. Explain the impact that subsidies will have on the price of electric vehicles.

Q3. Assess the likely impact that the measures outlined in the article will have on the global competitiveness of the French car industry.

Click here for the source article

TheCuriousEconomist

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