French Automotive Sector Facing Multiple Challenges
The French automotive sector is undergoing a challenging period, exacerbated by a series of economic, regulatory, and geopolitical factors. According to the Organisation Internationale Des Constructeurs Automobiles, France's production of passenger cars and light commercial vehicles in 2024 saw a significant decline of 10% compared to the previous year, falling from 1,505,079 vehicles in 2023 to 1,357,701 units in 2024.
Passenger car production in France dropped by 11%, amounting to just 910,243 units, while the output of LCVs decreased by 7%, totaling 447,458 vehicles. These figures represent a concerning trend for the French automotive industry, which has seen production levels fall substantially in recent years.
Jean-Louis Pech, president of the French automotive component makers association FIEV, highlighted the gravity of the situation during a recent senate hearing. He pointed out that national production had decreased by a staggering 63% since 2002 and by 38% since 2020. "These numbers are a clear indication of the challenges we face. The decline in production is reflective of both external and internal pressures," Pech said.
Impact of External Factors
A key external factor that is contributing to the strain on the French automotive sector is the 25% tariff imposed by the United States on car imports. This tariff has made it more expensive for French automakers to export their vehicles to the US, one of the largest automotive markets in the world. The tariff is seen as a direct challenge to the competitiveness of European car manufacturers, particularly those in France, who are already facing heightened production costs due to energy regulations and labor conditions.
Furthermore, the EU’s ambitious environmental regulations and energy transition targets are adding additional layers of complexity. European car manufacturers must adapt to stricter emissions standards and invest in costly technologies, such as electric vehicles and related infrastructure. While the shift to EVs is essential for meeting climate goals, the slow pace of adoption in Europe, combined with the economic pressure from high inflation rates (from 2022 to 2024), has widened the competitive gap between European and Asian suppliers. This situation is causing French manufacturers to reconsider their production strategies.
Sourcing Components from Outside the EU
The ongoing pressure on French automotive production has led to concerns about sourcing cheaper components from outside the EU. According to a March survey conducted by FIEV, 55% of its members have acknowledged the possibility that French and European automakers may look to lower-cost suppliers outside of Europe to stay competitive. This shift could significantly impact domestic suppliers and further erode the job market in the sector.
In 2024, employment in France’s car component manufacturing sector decreased to around 56,000 jobs, reflecting a 17% decline since 2019. This job loss is a direct result of the restructuring efforts, site closures, and a reduced number of vehicles being produced. Approximately 7,300 jobs were lost in the first quarter of 2024 alone.
The outlook for suppliers is grim, with 42% of European suppliers anticipating operating at a loss in 2025, according to FIEV data. This data paints a worrying picture for the future of the French automotive component industry, as the sector grapples with global competition, rising costs, and market uncertainty.
The Need for European Support
To address these challenges, FIEV has called for the implementation of a baseline requirement of 75-80% “made in Europe” content in vehicles. This policy would ensure that a greater portion of components used in European cars are sourced from local suppliers, helping to stabilize the local supply chain and preserve jobs within the EU. Additionally, FIEV advocates for European-level measures that would enhance the competitiveness of the automotive sector, particularly during the transition to electric vehicles.
Alain Ducasse, a member of the European Commission, supports FIEV's initiative, stating, "If we want to maintain Europe's leadership in automotive manufacturing, we must create a level playing field with other global markets. A strong European investment strategy would help us compete in the rapidly changing automotive sector."
The association is also pushing for a European investment strategy similar to the US's Inflation Reduction Act. This strategy would focus on reducing energy costs, cutting mandatory salary deductions and production taxes, and simplifying financing access, especially for small and medium-sized enterprises that are crucial to the supply chain.
Calls for Structural Reforms
FIEV's proposals also include reforms aimed at increasing the availability of financing for smaller firms, which are often the most vulnerable in the face of economic downturns and market shifts. With EU automotive manufacturers facing increased costs, such reforms are seen as crucial to maintaining production capacity in Europe.
"We need to ensure that European automotive suppliers, especially smaller ones, have access to the financial resources needed to invest in new technologies, such as electric vehicle production and green manufacturing processes. This is essential for Europe to remain competitive in the global automotive industry," FIEV president Jean-Louis Pech emphasized.
Future of the French Automotive Sector
Despite these challenges, there is hope for the French automotive sector, provided that the necessary investments and structural changes are implemented. The rise of electric vehicles presents an opportunity for manufacturers to lead in green technologies, but only if they can overcome the current economic and competitive pressures.
Alain Ducasse of the European Commission expressed optimism about Europe's future in the automotive sector, stating, "Europe has the technological expertise and innovative spirit to thrive in the green transition. With the right policies and investments, we can overcome these challenges and position ourselves as global leaders in sustainable automotive manufacturing."
Conclusion
The French automotive sector is at a crossroads, facing both significant challenges and opportunities. The combination of regulatory pressures, global competition, and internal production declines poses a serious threat to the future of domestic manufacturing in France. However, with strategic investments, stronger EU-level policies, and a commitment to innovation, the French automotive industry could emerge stronger, leading the way in the transition to sustainable and competitive vehicle production.
Key Takeaways:
• French automotive production declined by 10% in 2024, with passenger cars and LCV output down by 11% and 7%, respectively.
• The 25% US tariff on car imports, EU environmental regulations, and energy transition goals are exacerbating the challenges for French automakers.
• FIEV warns that over 55% of automotive component manufacturers fear that automakers may shift production to cheaper suppliers outside the EU.
• Employment in the car component sector has fallen by 17% since 2019, with 7,300 jobs lost in early 2024.
• FIEV calls for the implementation of EU-level measures to increase competitiveness, including a baseline requirement for "made in Europe" components.
• A European investment strategy similar to the US IRA is proposed to lower energy costs and simplify financing for SMEs in the automotive supply chain.
