France’s Shifting Automotive Market: Navigating Declines in ICE and the Rise of Electrified Vehicles

France’s automotive sector is undergoing a seismic transformation as internal combustion engine (ICE) vehicles face a steep decline, while electrified options—hybrids and battery-electric vehicles (BEVs)—gain traction. This shift is driven by a confluence of regulatory pressures, consumer preferences, and strategic investments by automakers. For investors, the transition presents both risks and opportunities, particularly in hybrid technologies and European-made EVs.

The Decline of ICE and the Hybrid Surge

ICE vehicle sales in France have plummeted, with combined petrol and diesel registrations dropping 39.2% in the first four months of 2025 compared to 2024 [1]. This collapse is exacerbated by stricter CO₂-based taxes and penalties for high-emission vehicles (over 193 g/km) [3]. Meanwhile, hybrids have surged, capturing 45.1% of the market in Q1 2025, up from 28.8% in 2024 [1]. Plug-in hybrids (PHEVs), despite a 41% year-on-year decline, remain a critical bridge to full electrification. The resilience of hybrids stems from their ability to mitigate range anxiety while offering lower emissions, making them a transitional favorite for consumers hesitant to fully commit to BEVs [5].

Strategic Investments in Electrification

French automakers are pivoting aggressively toward electrification. Renault leads the charge with the Renault 5 E-Tech, a neo-retro EV that sold 15,752 units in 2025, leveraging European production to qualify for full ecological bonuses [1]. The company also revived the 4L as an electric model and aims to sell 500,000 units of its E-Tech lineup in Europe by year-end [2]. Peugeot is modernizing its portfolio with the e-308 and e-3008 SUV, the latter offering a 701 km WLTP range, while Citroën focuses on affordability with the ë-C3, priced at €18,947 after incentives [2].

Beyond OEMs, Valeo is advancing electrified vehicle solutions, including high-voltage eAxle systems and 48V powertrains for urban mobility [2]. These innovations underscore France’s role as a hub for hybridization technologies, with Valeo and suppliers like Bosch and Continental supplying critical components for electrified vehicles [3].

Policy and Infrastructure Tailwinds

Government incentives remain pivotal. The ecological bonus, which covers up to 27% of a vehicle’s cost (capped at €5,000), has disproportionately benefited European-made hybrids and EVs like the Renault 5 and Citroën ë-C3 [4]. However, the phase-out of BEV-specific bonuses in July 2025 and the delayed social leasing program initially dampened EV sales, contributing to a 6.4% decline in H1 2025 [1]. The return of social leasing in September 2025, funded by energy savings certificates, is expected to stimulate demand for 50,000 electrified vehicles [2].

Infrastructure expansion is another catalyst. France now has 118,000 public charging points, with a target of 150,000 by year-end [1]. This growth is critical for alleviating range anxiety and supporting the broader adoption of BEVs.

Risks and Opportunities for Investors

While hybrids dominate the current landscape, long-term investment should prioritize BEVs and solid-state battery technologies. The Renault 5’s success demonstrates the appeal of affordable, locally produced EVs, but competition from Tesla and Asian automakers remains a risk. For instance, the Tesla Model Y’s sales declined in 2025 due to pricing pressures and increased competition [1].

Investors should also monitor policy shifts. The redirection of ecological bonuses toward energy savings certificates could reshape incentives, favoring hybrids over BEVs in the short term. However, the EU’s 2035 ICE ban and France’s 2040 net-zero target ensure long-term tailwinds for electrification [3].

Conclusion

France’s automotive market is a microcosm of the global transition to electrification. While ICE vehicles face obsolescence, hybrids and BEVs are reshaping the industry. Strategic investments in European automakers like Renault, Peugeot, and Citroën, as well as component suppliers like Valeo, position investors to capitalize on this shift. As infrastructure expands and policies evolve, France’s electrified future promises both challenges and opportunities for those who navigate the transition with foresight.

Source:
[1] Electric Cars: 2025 Sales Disappoint, but the Renault 5 ... [https://www.go-electra.com/en/newsroom/2025-ev-sales/]
[2] French electric cars 2025: Prices, models, incentives [https://www.go-electra.com/it/newsroom/french-electric-vehicle/]
[3] France's BEV Market Gains Momentum in April 2025 as ... [https://alternative-fuels-observatory.ec.europa.eu/general-information/news/frances-bev-market-gains-momentum-april-2025-renault-leads-charge]
[4] France Hybrid Vehicle Market 2025: AI, Electrification, and ... [https://www.linkedin.com/pulse/france-hybrid-vehicle-market-2025-ai-electrification-lahec/]