UPDATE 1-France to fund research on eco-friendly cars

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PARIS, Oct 9 (Reuters) - France will support research on low-carbon emission cars with 400 million euros in funding over four years, President Nicolas Sarkozy said in a speech at the Paris auto show on Thursday.

Sarkozy also said he would seek changes to EU rules on state aid to allow member countries to support carmakers in their efforts to produce more eco-friendly vehicles, arguing the U.S. government was offering state aid to its automakers.

"The U.S. Treasury is preparing to grant 25 million dollars in long-term loans at unbeatable rates to U.S. carmakers for them to renovate their plants that are more than 20 years old," Sarkozy said.

"I don't want us (Europeans) to be living in a framework that doesn't allow us to help our own carmakers undertake a major technological shift," he said.

"That is why I will propose to the European Commission and to our European partners a revision of the common framework on state aid ... so that it can be harmonised with the goals we are pursuing in the context of the climate-energy package."

Sarkozy said France would launch a plan to support research and development on vehicles with low carbon emissions. He said massive investments were required to make such vehicles widely available and to improve their performance.

"In total, we will mobilise 400 million euros of public finances over the next four years, exclusively for research and development on non-carbon vehicles," he said.

Sarkozy was talking against a backdrop of economic doom and gloom in the European car market, with sales plummeting and auto makers cutting their output in a sign turmoil on financial markets was ruining consumers' appetite for major purchases.

European carmakers' association ACEA said passenger car sales in the region fell by 15 percent in August. Analysts expected further significant falls in the fourth quarter. (Writing by Estelle Shirbon; Editing by Crispian Balmer and Andrew Macdonald)