New CO2 rules give French a boost at home

By Lawrence Speer, Automotive News Europe

PARIS -- French carmakers are increasingly viewing CO₂ taxes as an opportunity to increase market share, rather than an obstacle to future growth.

Renault and PSA/Peugeot-Citroen combined for 56.8 percent of France's new-car market in the first three months of 2008, up from a 53.1 percent share during the same period last year.

The French brands also had nine of the top 10-selling vehicles, according to data from the French car industry association CCFA.

Most EU member countries are expected to have CO₂-based car levies in place by 2010. France imposed a CO2-based purchase price tax January 1.

New models were one reason French carmakers outperformed most rivals in the domestic market. But they also reaped the benefits of France's so-called "bonus-malus" system of taxes and incentives.

CCFA President Xavier Fels said the new tax scheme "clearly" encouraged consumers to buy French.

'Massive effect'

"There's been a massive effect from the bonus-malus system, and it's been strongest for the French companies that anticipated demand for smaller vehicles and lower emissions," said Fels, who joined the industry group last year from PSA.

French companies also benefited from their lower exposure to the luxury and SUV sectors, where the CO₂ taxes pushed sales down sharply for Mercedes-Benz, Toyota and the Volkswagen group.

Cars that emit 160 grams per kilometer or more face a tax of up to 2600 euros.

The three French brands were particularly strong in the minicar and small car segment, which jumped from 40 percent of sales in December 2007 to more than 50 percent of new registrations in the first quarter of 2008.

French carmakers sold 73 percent of all models that emit less than 120g/km of CO₂.

These models are eligible for 700-euro government-funded purchase-price rebates since late 2007.

French companies also controlled 56 percent of the market for cars emitting 121g/km to 140g/km CO₂, many of which qualify for a 200 euros rebate.

Leading sellers in these categories include the Renault Clio and Twingo, Peugeot 207 and Citroen C3.

The downside

Renault's French sales director, Jacques Chauvet, attributed his company's 10 percent overall gain in the first quarter to new product launches, the growing presence of low-cost Logans, and the carmaker's strength in the low-emission sector.

"We are making the most of the segment shift toward small, diesel-equipped cars stemming from the bonus-malus system," Chauvet told Automotive News Europe.

Chauvet admitted that the new CO₂ tax system had hurt sales at the upper end of the product line, where the new Laguna sedan is "slightly below" expectations. But he played down concerns that selling small cars or low-cost Logans will not translate into profits.

"Little by little," he said, "these small models are going to be more profitable."

From Automotive news Europe (A Crain publication)