Thursday, July 26, 2012

European Auto Industry

The Times looks at Europe's auto industry and sees overcapacity everywhere. Will the French strategy--promoting "clean" cars (hybrids and electrics)--work? It will be costly, with bonuses of up to €7000 euros per car. Montebourg thinks this will be "self-financing" because of the penalties attached to the purchase of highly polluting vehicles, but I'm not sure the arithmetic works out: if the plan is self-financing, it would be effective in stimulating a moribund industry or encouraging a shift to new technologies, and if it isn't self-financing, it will heavily burden the state. Meanwhile, PSA announced huge losses of nearly $1 billion for the quarter.

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