This report discusses the issues that a medium sized Scottish manufacturing firm like yours, which specializes in the production of motor car components, would need to consider prior to establishing a branch in France. From the map below we can see France is right in the centre of the world’s largest market which offers positive economic conditions to possible investors. In addition to this it has a stable and strong currency – the euro, a high quality workforce and costs which are similar to those of European competitors.
France is recognised as one of the top host countries in Europe for multinational firms. This is due to the many resources offered by its geographical position and business community. In the past two years, more than 60,000 jobs have been created by international investors in France. The formation of the Invest in France Agency (IFA) shows the eagerness of government institutions to help and encourage foreign investment, by providing an organisation adapted to their needs.
These same institutions also appreciate that Foreign companies contribute to the development of the French economy by bringing their knowledge of particular industry, technology and skills, i. e. a “Win – Win” scenario. The automotive sector is seen as a flagship industry in France and directly employs over 150,000, giving a turnover of 92 billion euros. On the whole this accounts for 15% of the countries industrial turnover. A total of 13 car manufacturers are represented in 21 assembly plants.
The domestic market is dominated by Renault and PSA (Peugeot Citroen) and just about 14% of global purchases and orders originate from their technical centres, making France and Paris in particular the third largest automotive decision making centre in the world after Detroit and Tokyo. However, despite the dominance of these two companies, foreign manufacturers still have significant market share of both the domestic and export market. The recent arrival of Mercedes-Swatch and Toyota has again boosted the industry in France.
In addition and of particular relevance to your company is the automotive suppliers sector, which currently employs nearly 134,000 people in 590 sites across the country. The combined turnover of these companies is nearly 25 million euros, representing over 20% of the revenue generated by the automotive industry as whole. The fact that two thirds of the sector’s turnover and nearly one quarter of its exports come from French subsidiaries of foreign groups is significant and is clear evidence that foreign investment is encouraged.
France is the largest country in Western Europe but has a relatively low population, in fact it is half that of nearby, Germany. This means there is a lot of land available at moderately low prices. It shares borders with seven countries and its coastline borders four seas, notably the English Channel / North Sea and the Mediterranean. This makes it an ideal link between Northern and Southern markets. As described below its high quality transport infrastructure allows fast connections between all the major French and European business centres.
The main centres for the French automotive industry are detailed below and it is recommended that you target one of these areas for your manufacturing plant. Agence De Developpement De L’Aisne – situated half way between the car-maker sites in Paris and those in the Nord-Pas-de-Calais region and bordered by automotive part manufacturers, the Aisne is perfectly situated to meet the needs of this industry. In addition to this the top ten European vehicle manufacturers are all inside a 220 mile radius and there are more than 50 automotive suppliers in the department.
The Bourgogne Developpement (Burgundy) – centrally positioned to support the greatest assembly lines in Europe. The automotive industry is particularly dynamic here. The majority of the big European car makers are within a 500 mile radius. Comite D’Expansion De La Moselle – Capem Moselle – Industry has been around for a long time here in Moselle, ultimately it is seen as a first-class location for the automotive industry. Many automotive component manufacturers and subcontractors can be found here and the large European auto-makers are situated within a 300 mile radius.
Comite D’Expansion Economique De La Sarthe – Automotive is a leading industry in Sarthe, with its longstanding tradition in this field and centred around Le Mans and its legendary 24 hour race. Around 100 automotive businesses can be found in this area, including auto makers, component manufacturers and subcontractors. Haute-Marne Developpement – a significant sector in Haute-Marne with 3000 jobs stretching over 4 main branches: Transmission components, engine components, steering, suspension and braking components.
France has one of the largest and well maintained road networks in Europe, totalling 950,000 km, including 9,300 km of motorway. The network is fully interconnected with the main countries of Western Europe. As can be seen below it has one of the lowest road traffic densities in Europe, allowing more flexibility when deciding where to locate. The high-speed (up to 350 km/hr) rail network known as TGV, links all of France’s major cities with exceptional speed and safety. There are plans to have the TGV network extended to link with the Spanish, German and Italian networks by 2005.
There is also a link to London and the UK via the Channel Tunnel. In addition to the high speed network, France has the most extensive railway system in Europe. French ports currently dealing with over 300 million tons of goods per year and five out of the main fifteen ports in Europe are situated in the country. Marseilles, France’s and the Mediterranean’s biggest port is ranked 3rd in Europe and handled 96. 5 tons of goods in 2000. Le Harvre, on the Channel coast is Europe’s 5th largest port and handles 65 million tons annually.
Improvement has always been a key factor for success in the automotive industry. The main challenges include- improving safety, comfort, fuel economy and of course quality. Furthermore, lowering costs and lead times are also important. Fiscal Legislation in France is very favourable for setting up R;D Centres. You can apply for tax credit (maximum amount of 6. 1 million Euros per year) equivalent to 50% of expenditure increases for the year in proportion to the average of expenditures over the two previous years.
There are several research programs in operation with PREDIT (National Land Transport Research and Technology Program) being the most active in the automotive sector. It has an annual budget of 305 million euros to invest in projects between 2002- 2006 and along with other programs supports small and medium-sized companies in their research activities. The following sequence of graphs give an excellent overview of the commitment to R;D activities in France, much of which is directed at the automotive industry.