A Comparative View of Motor Vehicle Production in France

Motor vehicle production in France decreased by about 40% between the years 2000 to 2016. In contrast, motor vehicle production in the EU as a whole only decreased by 0.1% and motor vehicle production by the two French motor vehicle groups (PSA and Renault-Nissan) increased by about 52% across the world during this period. Why the difference? Following the creation of the EU Single market, the distribution of motor vehicle production in the EU has become concentrated in two areas: one central zone (a corridor running northwest-southeast between the Danube River and the North Sea) and a peripheral one (Spain). In this context, cost competitiveness losses can trigger a reallocation of production to the corridor which is difficult to revert once settled. In France in particular these forces seem to have been a major factor behind a significant impact in its motor vehicle production capacity. They also help explain why production reallocation decisions are costly and difficult to revert by policy. Additionally, agglomeration can also help explain why production decisions are asymmetric: production might not return to a given location, even if competitiveness losses are redressed. Countering agglomeration economies and moving production to the corridor is possible: avoiding cost competitiveness losses helps explain the different evolution of production in Spain compared to France. Overall, the corridor helps explain the stability of motor vehicle production in the EU between 2000 to 2016 compared to the volatility experienced by individual Member States such as France.