(Bloomberg) -- France will gradually cut hybrid and electric-car subsidies in the coming years, posing a risk to the segment that’s growing but still remains a relatively small portion of the market.
The government plans to decrease an incentive to buy electric cars from 7,000 euros ($8,160) this year, to 6,000 euros next year and 5,000 euros in 2022, according to a budget plan unveiled Monday by Finance Minister Bruno Le Maire. The state handout for hybrid rechargeable vehicles will be halved to 1,000 euros next year.
A separate incentive for low-income households switching to electric vehicles will be pegged at 3,000 euros, lower than the cash-for-clunkers subsidy that was offered for a couple of months earlier this year.
“We have backed the auto industry while at the same time accelerated the lowering of carbon emissions,” Le Maire said.
Electric vehicles made up 6.1% of the French market during the first eight months of the year, according to data from the industry group CCAF industry group, up from 1.9% in 2019. Rechargeable hybrids are also capturing a growing market share.
Government incentives in some European countries including France and Germany helped boost car sales earlier this year after lockdown measures to contain the coronavirus sent purchases into a tailspin. The French state’s policies on subsidies particularly affect Renault SA (PA:RENA) and PSA Group (PA:PEUP), which rely on the domestic market.