A spate of investment deals and subsidies have signalled France’s commitment to bolstering strategic sectors and its industrial sovereignty, as president Emmanuel Macron leverages the US’s $369bn incentives package under the Inflation Reduction Act (IRA).

In May, the Taiwanese battery company ProLogium selected France for its first overseas large-scale solid-state battery manufacturing facility in an investment worth €5.2bn. Following the Choose France summit that same month, Mr Macron announced the country had secured €13bn worth of investment pledges. Then in June, the government announced up to €2.9bn in state support — the largest subsidy it has given since 2017 — for a €7.5bn chip factory being developed in the country’s south-east by STMicroelectronics and GlobalFoundries. 

“France is trying to make up for lost time as, for decades, its industrial output has lagged that of other key European economies,” says Fabrizio Farina, Europe analyst at risk intelligence company Verisk Maplecroft. In 2021, the government launched its France 2030 investment plan, which aims to mobilise €54bn by the end of the decade and targets specific sectors such as energy, healthcare and biotechnology and electronic components. 

Mr Farina believes Mr Macron will position France as the EU’s national counterpart to the US’s IRA. “Other EU countries will soon follow suit as France is setting a new standard for incentive-driven industrial strategies across the bloc,” he adds.

The country ranked fourth globally for incentive deals offered in 2022 — behind the US, UK and Canada — according to IncentivesFlow, an fDi Intelligence database.  

Leveraging the IRA

Mr Macron made headlines in May as he announced plans to set up a green tax credit to support green technologies, making France the first European country to formally respond to the IRA. 

Nicolas Bouvier, partner at Brunswick Group, says the president “has been leveraging the IRA to bring Europe together in its bid for greater strategic autonomy”. He argues that recent project announcements and incentives are not in themselves a reaction to the IRA, but rather a continuation of the pro-business stance of the Macron administration.

The French government has been consistent in its approach to attract new foreign direct investment (FDI), says Mr Bouvier. But since the 2022 presidential elections, there has been an added layer of so-called industrial sovereignty. “This was the buzzword of last year’s election and it’s now used to mirror the language of the populist [challengers].” 

Amid circulating rumours that Elon Musk may select France for Tesla’s forthcoming gigafactory following meetings with the French president, Mr Bouvier claims “we should expect more big-ticket projects”.

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Marc Lhermitte, partner at EY Consulting, pointed out that France has not offered a large pot of additional money since the unveiling of the IRA last year. The government’s Green Industry Bill presented in May aims to support green hydrogen, batteries, wind power, heat pumps and solar panel projects. But Mr Lhermitte adds it “is striking” in being “non-generous in terms of direct incentives.”

“Instead, it’s long-term tax incentives, training grants and a reallocation of research tax credit to more specific areas in the green economy,” he adds. “It’s really doing as much as possible with fewer financial resources.” 

Still, as an FDI destination, France is attractive as it is competitive and still catching up on the investments that were not made between 2000 and 2015. France received 688 greenfield FDI projects in 2022, according to fDi Markets, taking just under 10% of the year’s total inflows into Europe.