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France drives green car push as Peugeot slides
France drives green car push as Peugeot slides

France will boost support for environmentally-friendly cars as part of a rescue plan unveiled amid growing concern for the country's crisis-hit car industry and top carmaker Peugeot.

Highlighting the difficulties facing the French car sector, PSA Peugeot Citroen on Wednesday posted a first half net loss of 819 million euros ($A972 million), more than reversing a year-earlier net profit of 806 million euros.

The recovery plan, presented by Minister for Industrial Renewal Arnaud Montebourg, includes a range of measures to boost cleaner vehicles amid hopes French carmakers can carve out a niche in the market.

But it also contained hints of protectionism, with France planning to ask the European Union to put its 2010 Free Trade Agreement with South Korea under surveillance to "defend the interests of the French automobile industry".

The recovery plan will boost consumer bonuses for purchasing electric cars from 5000 euros to 7000 euros and for hybrids from 2000 euros to 4000 euros at a cost to the government of about 490 million euros.

Mr Montebourg said the extra costs will be compensated by an increase next year in penalties for driving heavily polluting vehicles.

The project will also see the government commit to 25 per cent of its new vehicles being electric or hybrid and provide financing facilities for manufacturers and suppliers suffering from a major drop in European car sales.

A total of 350 million euros in investment credits will be available to car manufacturers and 150 million euros in assistance will be available to small- and medium-sized businesses in the sector.

The government will also hire filmmakers, including Luc Besson of The Fifth Element fame, to direct advertisements encouraging consumers to buy French cars, Mr Montebourg said.

Prime Minister Jean-Marc Ayrault said the government had chosen to "go on the offensive" with the plan, which he said was "extremely ambitious".

But Ferdinand Dudenhoeffer, an expert on the car sector at the university of Duisburg-Essen in Germany, said the new plan was like "trying to put out an immense fire with a glass of water".

Peugeot's strategy had simply failed and all it could now do was to "reduce capacity and get through the (eurozone) crisis at a low level", he told AFP.

Renault, France's second biggest car-maker, welcomed the new plan, with its chief executive Carlos Ghosn saying it was sending a "strong signal" in favour of "clean" cars.

Renault however confirmed reports that the launch planned for later this year for its much-heralded new electric model Zoe was being put off until 2013 due to technical difficulties.

Peugeot had been expected to announce a first-half net loss but the final figure was more than double analysts' expectations.

It said overall sales were down 5.1 per cent in the first half to 29.6 billion euros while the car division alone suffered a net loss of 662 million euros.

The company, which has already announced 8000 job cuts in France, said it will implement a 1.5 billion euro cost reduction plan through to 2015.