France to gradually phase out car scrapping scheme

PARIS, July 13 (Reuters) - France will gradually phase out a scheme encouraging drivers to trade in old cars for new ones and help auto manufacturers through the economic downturn, Industry Minister Christian Estrosi said an interview on Monday.

Renault (RENA.PA) Chief Executive 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.

"The scrappage subsidy cannot be indefinitely maintained," Estrosi said in Les Echos newspaper.

"We have to think about stopping it progressively. We're working on it."

The scheme, introduced last year as part of a package of measures to help France through the financial crisis, has boosted car sales this year.

French new car sales rose 7.1 percent in June, helped by the subsidy. As of mid-June, around 200,000 new car registrations in France, or 20 percent of the total, were linked to the scheme offering cash payments for traded-in cars. (Reporting by Anna Willard, editing by Will Waterman)