France bails out its car-makers – but there's a catch

France's president Emmanuel Macron has granted the French car industry an incredible €8 billion ($A13b) loan on the condition it transitions to pure-electric cars.

Announcing the loan as part of dramatic plans to kick-start the car industry in France following the COVID-19-enforced shutdowns, Macron told French press:

“We need a motivational goal: make France Europe’s top producer of clean vehicles by bringing output [up] to more than one million electric and hybrid cars per year over the next five years.”

To achieve the switch to EVs, Macron has upped the state grant that incentivises consumers to buy an electric car from €6000 ($A10,000) to €7000 ($A11,500) on electric cars that cost less than €45,000 ($A75,000).

A smaller €2000 subsidy is also available for plug-in hybrids that cost less than €50,000 ($A83,000) but only if they are capable of travelling 50km on pure-electric power.

Cannily, Macron says his government will also help dealers clear the existing 400,000 vehicles that were left unsold during the lockdown by offering a further grant of €3000 ($A5000) as part of a scheme that's claimed to see around three-quarters of households eligible.

As part of the huge cash injection, Macron also said that no car model currently produced in France should be manufactured in other countries.

This has prompted Renault to announce it is switching production of its pure-electric ZOE's powertrain from Asia to France.

The 're-localising' plan will also see Renault, as well as the PSA Group, team up with Total to develop batteries for French-built EVs with a plant expected to be built in France.

It's thought other French car-makers will be forced to follow suit.

Renault, meanwhile, is still awaiting sign-off from the French government on a further €5 billion state aid loan ($A8b) that has been delayed over high-level talks between the car-maker and its workforce over planned closures that could see the loss of 5000 jobs.

Macron's loan conditions of requiring France to become Europe's number one EV-maker isn't as far-fetched as it sounds. In 2019 it built more electric and hybrid cars than any other country in the Eurozone, but many pundits suggest the arrival of the Volkswagen ID family later this year will see the German car-maker quickly overtake Renault.