The French government will gradually phase out its scheme encouraging drivers to trade in old cars for new, industry minister Christian Estrosi told Les Echos newspaper.

The scheme, introduced late last year, has helped boost sales of small, fuel efficient cars by about 200,000 or 20% of the total according to industry estimates. French new car sales rose 7.1% in June, helped by the subsidy.

Estrosi told the paper: "The scrappage subsidy cannot be indefinitely maintained. We have to think about stopping it progressively. We're working on it."

Renault CEO Carlos Ghosn said on Friday the end of scrappage schemes in Europe could make 2010 as difficult as 2009 for carmakers. He urged a gradual transition rather than a sudden end to such schemes to help prevent a brutal shock for markets.