The French car industry is in trouble. To put it simply, it's selling fewer cars. In 2019, 2.21 million cars were sold in France. During the pandemic, this figure dropped by 25% and hasn’t fully recovered. In 2024, manufacturers sold only 1.72 million in France.
And yet, here's the irony: while selling fewer cars, the sector has been posting record profits. So, what's going on?
Fewer cars, bigger profits
Well, one of the leading reasons is that a car today is much more expensive. Between 2014 and 2024, the average price of a new average-sized vehicle increased by 34%, from €24,448 to €36,712. That's about €12,000 more to own a new car and well above the 15% rise in the cost of living.
Manufacturers have been able to charge so much more because, after the pandemic, there were fewer cars available due to supply issues and higher demand. After all, consumers were ready to repurchase big-ticket items. Manufacturers also sold larger and more profitable vehicles. So, from 2021 to early 2024, they posted record profits.
Now, companies find themselves in overcapacity because car sales for Renault, Citroën, and Peugeot, for instance, have stalled. Renault's low-cost brand, Dacia, is one of the few models that continues to sell. In contrast, Citroën, for example, only made a third of the sales in 2024 compared to 2011.
If people buy fewer cars, logic dictates that factories must produce fewer cars as well. Since 2023, more French factories have been closing or going insolvent, threatening 80 sites and 9,000 jobs across the country. For example, at the end of 2024, Michelin closed two tire factories and announced 1,200 job losses. Most of these country-wide losses will fall to subcontractors rather than manufacturers because the former, the equipment suppliers, cannot be as nimble and cannot renegotiate multi-year contracts.
The same situation can be found Europe-wide. Bloomberg reported in 2024 that nearly a third of major passenger car plants from Europe's five largest automakers —BMW, Mercedes-Benz, Stellantis, Renault, and VW —were underutilized. The auto industry provides over 7% of the EU's GDP, providing 13 million jobs, where, in many cases, these factories play a vital role as the lifeblood of local communities.
The electric shift—and the China challenge
So, the problem is complicated, but the situation is further aggravated by three enormous structural issues: electric vehicles (EVs), offshoring, and China.
The push for electric vehicles (EVs) on environmental grounds doesn't happen overnight. EVs account for 15% of cars on French roads, and the rollout of infrastructure has been slow. The EU's recent decision to soften its automotive carbon dioxide emissions rules may also mean that fewer electric vehicles will be sold in the coming years than EV advocates had hoped. In a further blow, the French government recently reduced the ecological bonus for purchasing an electric vehicle from €7,000 to a maximum of €4,000.
The EU is also mandating that, after 2035, new vehicles will no longer be sold with internal combustion engines. In 2011, diesel made up 80% of new car sales, but by 2024, this had dropped to around 10%. If fewer diesel parts are needed, this adds further economic pressure on the foundries that supply them, especially since these parts cannot be repurposed for hybrid engines. Indeed, while the switch to an electric car economy will create jobs, it is also estimated to put 40,000 at risk. However, job losses have also arisen because manufacturers now make these parts in other countries.
This offshoring is a structural issue that has been happening since the 1990s, making a rebound more challenging for the French auto industry. Much of the car sector has relocated to eastern or central European countries. Renault and Stellantis (except for Fiat-Chrysler) build fewer cars in France, down to 18% in 2023 from 23% in 2019.
Trade unions blame manufacturers for using electric vehicles as a pretext to continue offshoring. Citroën produces its e-C3 electric car in Slovakia, and Renault will build its future Clio 6, on sale in 2026, in Bursa, Turkey. The criticism is that, with declining sales and potentially lasting overcapacity, manufacturers are closing the oldest plants in high-wage countries, rather than the newer ones in lower-wage countries.
Stellantis told Euractiv in 2024, "Cost-cutting is a vital issue for the entire industry, particularly in the face of aggressive offers from Chinese competitors."
China is the biggest global vehicle manufacturer, producing 30.2 million annually, based on 2023 figures. By contrast, the U.S. comes second at 10.6 million, Japan comes third at 9 million, and France produces 1.5 million.
The competition from China is fierce; they produce cheaper EVs and are gaining market share. The Chinese also have an advantage in car production because they buy their energy from the most affordable source, often Russia, which the EU does not.
China has the world's leading battery industry, and BYD, a successful manufacturer, is expanding into Europe; this could lead to increased overcapacity and force Renault, Stellantis, and VW to restructure even further.
Renault’s electric Twingo, for example, is extremely popular, designed in partnership with Chinese technicians, and will be built in Slovenia using Chinese car parts that are much cheaper than European ones, as parts are not subject to the same tariffs as Chinese cars.
And none of this considers the impact of President Trump's yo-yoing tariffs.
A mix of global disruptions, structural inefficiencies, Chinese competition, and the challenges of transitioning to electric vehicles has left the sector in a fragile state. So, what's the solution?
Can France reinvent its car industry?
One would be to slash the prices of new cars, a view supported by Bernard Jullien, a lecturer in economics at Bordeaux University and a specialist in the automotive industry. Smaller cars are also an answer, primarily electric, at a much cheaper price point. As Jullien told FranceInfo, "If we keep trying to sell cars at 40,000 euros, then we'll have neither the sales volumes nor 100% electric vehicles."
Plateforme Automobile (PFA), the French sector trade body, told Euractiv that the solution is reinvention by electric vehicles so the industry can battle "the most serious crisis in its history." Indeed, many unions believe that small electric cars could be ideally built in northern France.
In March, European Commission Vice-President Stéphane Séjourné announced an action plan to support the sector, which he said was in mortal danger. Séjourné told Le Monde that the Americans lead in self-driving cars, China in EVs, Korea in batteries, and Chile in providing the lithium for these batteries. To ensure that Europe doesn't just become the world's assembly plant, it must start producing autonomous, connected EVs, adding, "There is a way to design, produce, and sell vehicles that will be the pride of future generations."
And while clearly it seems quite the challenge for the moment, the French car industry knows one or two things about change. This is an industry that has the know-how, has competed internationally for over 120 years, and has survived two world wars. The industry might be down, but it isn’t out yet.
