France is to dramatically increase the level of subsidy available to electric and hybrid vehicles, while the State will also commit to ensuring 25% of its fleet is of the same variety.

News that EV grants will increase from EUR5,000 to EUR7,000 for electric vehicles and for hybrid vehicles to a maximum of EUR4,000 - including company cars - was delivered minutes ago at the end of this morning's (25 July) meeting of the French Cabinet in Paris, with a press conference scheduled in the next hour.

Subsidies will be available up to the end of this year, with the French budget proposals for 2013 due to examine the issue again.

The development caps a frenzied two weeks of activity from the French government following what it referred to as PSA Peugeot Citroen's "shock" decision to axe up to 8,000 jobs in France and shut the C3-producing plant at Aulnay near Paris.

PSA CEO, Philippe Varin has been summoned several times to see both French Prime Minister Jean-Marc Ayrault and Economics Redevelopment Minister, Arnaud Montebourg, as the newly-elected President and government face their first serious domestic challenge over and above the on-going gloom in Europe.

"These increases will be valid up to the end of 2012...the State will lead the way with 25% of new cars being either electric or hybrid, while every new urban vehicle will be electric," said a statement emailed to just-auto from the Economics Minister's office.

"Implementation of recharging stations will be increased for electric vehicles and hybrids."

Today's statement noted employment in the French automotive sector had declined 30% in ten years, while only 2m vehicles will be produced in the country this year compared to 3.5m in 2005.

"The PSA Goupe has just announced large job cuts - a real shock for our country," said the statement. "There is a real urgency to take the right measures so the auto sector can bounce back."

Further details are expected later today following the press conference in Paris concerning the state of France's auto industry.