French Automakers Disagree on Incentives Strategy

09/09/96

Reuters has reported that Peugeot and Renault have opposing ideas about what to do when France's government-supported car rebate scheme expires in September. The government rebates have supported the French car market for three years, spurring demand in a weak economic period by offering 5,000 to 7,000 franc rebates for car buyers that trade in old clunkers. The French carmakers' association (CCFA) said more than 30 percent of last month's car sales resulted from the scheme.

The disagreement between Peugeot and Renault mirrors a reported clash between the French finance and industry ministries. Peugeot chairman Jacques Calvet has asked the government to lower the value added tax on car sales or else to offer rebates proportional to the price of the car purchased. A Peugeot spokeswoman said, "Mr. Calvet does not think the market will rebound naturally."

Renault, on the other hand, does not want the government to extend the rebate scheme: "We're not seeking any new support measures," said a Renault spokesman. The spokesman also said that company chairman Louis Schweitzer opposes the incentives on the grounds that they skew sales toward less expensive cars, giving the automaker less of a profit margin, disrupting the used-car market, and causing distortions in re-sale prices. Renault entered the private sector this summer.

Car industry officials say the decision lies with Prime Minister Alain Juppe, who is expected to announce it soon. Industry Minister Franck Borotra favors the incentives, but said no decision had been taken on whether to extend them beyond their scheduled expiration date, September 30: "I've put some proposals to the prime minister and it's up to him to decide," Borotra told the newspaper Les Echos.

Borotra's proposals put him at odds with Finance Minister Jean Arthuis, a longstanding opponent of the scheme. One of Arthuis' aides, Christian Noyer, said that the finance ministry would not introduce any new measures to spur spending during the 1997 budget planning process.

The government of Prime Minister Edouard Balladur started the rebate program in 1993 to jump-start a recovery in the French car industry, which plunged into recession following a record year in 1992. The program expired on June 30, 1995. But was revived by Juppe's government with a few changes last October. Juppe's stated aim was to clear the streets of the oldest and dirtiest cars, although its true objective appeared to be the preservation of jobs in the industry, one of France's biggest employers.

Paul Dever -- The Auto Channel