Paris, France

A French government source announced that the country is significantly scaling back subsidies for electric vehicle (EV) purchases as it tries to reduce a growing budget deficit. Under the new subsidy framework, there will be subsidies of 2,000 euros to 4,000 euros depending on your income, down from the current range of 4,000 euros to 7,000 euros.  

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It is part of a wider effort to cut public spending and narrow fiscal gap. It comes as carmakers in Europe struggle with slower than anticipated EV demand. The official said that financial constraints compelled the cuts, but said 'the government remains fully committed to the electrification of light vehicles.'  

France has also outlined a smaller budget for incentives for the expansion of the vehicle electrification. In 2023, EV aid from public sources amounts to over 1.5 billion euros and falls to close to 1 billion euros in 2025.  

The new plan calls for 70% of the 1 billion euros to be spent on purchase subsidies, with the balance going toward commercial vehicle electrification and a social leasing program to make affordable access to EVs available to low income households.  

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This may complicate the auto industry's transition to electric mobility further, as automakers are heavily dependent on subsidies to spur EV adoption. The reduced incentives may further dampen demand in the European market, which is already seeing sluggish sales, and jeopardise France’s efforts to meet its reduction in emissions targets.  

France's wider strategy of fiscal consolidation is prompting the move, with public debt mounting. But it questions whether the government can sustain speed in a green transition while limiting government support for consumers and manufacturers.  

With France adjusting its EV policies, the government is expected to concentrate its remaining funds in a strategic way to assist low-income groups and critical parts of the market. How these changes will affect EV adoption and the broader auto industry remains to be seen.