Spain’s car market has taken a pounding as the country’s economy has descended into severe recession. While a scrappage scheme is now in place, concerns remain over the outlook for vehicle sales this year, writes Ivan Castano
“The worst is now behind us.” This is the way a leading trades union recently described the end of 2009, which was, on many counts, the toughest year in the history of Spain’s automobile industry, Europe’s fifth largest market.
But while the industry licks its wounds from the hardships of the past 12 months, the new year is not giving reasons to cheer either.
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Sales are forecast to hover around 950,000 units, down from 955,275 last year (when they fell nearly 18%); it’s a small fall thanks largely to the introduction of the Plan2000E subsidy. Had the government failed to launch the scheme last May, registrations would have plunged 30%, snowballing into a 42% decline for the past two years.
In 2008, when Iberia’s long-running property bubble burst, sales plunged 28% as the country fell into a deep recession.
‘Few lights, many shadows’
In its first statement of the year, top retail association Ganvam said 2010 will bring “few lights and many shadows” to the sector which will continue to struggle in 2010.
And 2009 was certainly a year to forget. Disastrous sales apart, the industry lost 10% of its small and midsize dealers while 30,000 people in the retail and repairs sector lost their jobs.
Ganvam’s President Juan Antonio Sanchez Torres said the second half will be particularly difficult as the Plan2000E will expire while the IVA sales tax is set to rise two points. Therefore, it urged Madrid to maintain the 2000E subsidy from June to December to ensure the full recovery of the industry, which is Europe’s third-largest car maker and number five in sales.
“We don’t want to, nor should we, always depend on external help but now, because of our strategic [economic] status, we need it to maintain our stability until the macroeconomic situation improves,” Sanchez Torres said, adding that Spain’s tax coffers have gained EUR566 in taxes per car sold, showing that Plan2000E is a “clearly positive” initiative for the state.
Under Plan2000E, the state offers EUR500 per car sale while regions contribute another EUR500 and manufacturers EUR1,000, totaling EUR2,000 per vehicle. The scheme has been hugely celebrated by the industry, which claims it is also helping slash CO2 emissions by encouraging the retirement of older vehicles.
First half swing
According to other industry lobby Ganvam, sales will rise an average of 15% in the first half but could plunge 10% after June when the new tax scheme rolls into effect. It urged the government to work to help improve the financing market to boost sales at a time when credit remains largely frozen.
Angel Diaz Cardiel, a senior official at the CCOO automobile trades union, agrees that sales will rise strongly in the first half but says dealers should introduce heavy discounts during the period to help insure against the spectre of big falls in last six months of the year. Sales have historically been high in April and May, the key months before the summer holidays begin.
“People usually buy more cars in April and May as the weather starts to improve and they get excited about getting a new car to drive to their summer holidays,” Cardiel notes. “Dealers should increase discounts in this period as there is still a lot of fear to spend in Spain.”
Regarding production, Cardiel expects output will decline some 20% this year, similarly to 2009. However, he expects production of small and midsize sedans to surge some 10% as key European markets such as Germany, France and Italy (where Spain exports most cars) bounce from recession. Most of this year’s production declines will come from the beleaguered industrial and van sector which does not benefit form state subsidies and where sales plummeted some 70% last year.
Transition
A leading industry consultant in the Basque country, home to Spain’s largest parts maker CIE Automotive, agrees that 2010 will be a difficult, “transition” year. However, he says Spain’s economy is expected to shift into recovery in the first quarter, providing a glimmer of hope that anaemic consumption will strengthen.
“People are starting to feel more at ease that Spain can come out of the recession, especially now that Germany, France and other European economies are doing better,” he says.
He also doesn’t expect Spain’s car industry to swing into full recovery until 2015 when the economy should have recovered from its recession.
Cardiel agrees, saying that any recovery won’t arrive until five years from now.
“The building bubble has affected us a lot. It has hit every sector of the economy,” he points out.
“We have a 20% unemployment rate and the country is a mess so I don’t really see sales of 1.5m cars coming back for a while.”
However, echoing other observers, he concludes: “The worst is behind us and we have touched bottom. Things can only get better from here.”
But, it seems, it will be a long haul to recovery.
Ivan Castano
See also: SPAIN: Car sales down 18% as industry closes ‘gloomy’ year
