Spanish automobile dealers have a lot to celebrate these days. This is because people are buying cars like there’s no mañana. Domestic sales are expected to leap 10% to 1.5 million cars this year, “something that has never happened in Spanish history,” David Barrientos, communications director for Spain’s vehicle manufacturers association ANFAC, tells just-auto.
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Production will mirror last year’s three million units, he adds.
Further boosting the industry, investments are expected to reach €7bn by 2006 as foreign manufacturers’ continue to bet in Spain’s manufacturing efficiencies.
Exports too are forecast to match last year’s 2.5 million units while carmakers’ revenues should mirror the €43.1bn they inked in 2003.
The sector’s outlook also remains buoyant for the next three years, observers say.
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By GlobalDataAccording to Barrientos, this year’s sales hike stems from several factors including low interest rates and strong consumer confidence, a macroeconomic backdrop that is prompting heavy buying. A government scrappage incentive called Prever (which saves people €720 by trading their older car for a new or nearly new one), is also fuelling sales, he points out.
Spanish-made models (such as the new Citroen C3, Seat Ibiza and Renault Megane) are selling very well in Europe, helping boost exports despite slumping demand from key car markets in France and Germany, Barrientos notes.
While 2004 will be exceptional, domestic sales are expected to plateau in 2005 to 1.45-1.5 million units, Barrientos says, as car buying slows amid a cooler economic environment which might include higher interest rates. Still, sales will likely outstrip the 1.4 million mark of prior years. They are also forecast to outperform other European markets as people replace older models in a country with one of Europe’s lowest motorisation levels.
There are some 457 cars per 1,000 Spaniards versus an average of 495 in Europe and 545 in Germany, according to ANFAC.
By car segment, small, mid-size and cross over utility vehicles (CUVS) will top the leader board in 2004, accounting for over 60% of the market, ANFAC predicts.
So far this year, Renault’s new Megane sedan has led sales with 109,708 units streaming out of dealers, up 36% form 2003. That model, along with Citroen’s C3 and Ford’s Focus, is expected to top this year’s sales gauges.
As income levels rise in Spain, mid-high models (such as the Megane Scenic or Xsara Picasso) and other CUVs should capture a larger share of the market against more popular midsize vehicles, observers say.
Trucks are also expected to sell strongly this year, Barrientos adds, as low interest rates make typically expensive financing easier to bear. Industrial-vehicle output should rise 8% to 38,400 units. The year’s champion seller is expected to be the Iveco Stralis.
Components must restructure
Despite the rosy forecasts, the Spanish auto industry could lose steam if certain reforms are not undertaken, experts say.
Apart from the need to further flexibilise its labour force, Spain needs to improve its transport logistics, particularly its rail network, Barrientos notes.
“We are a peripheric country that exports to Europe’s central market and we still have a hard time shipping cars there,” he says. “We need to make more holes in the Pyrenees and reduce bottlenecks.” Rail tracks must be widened to carry additional cargo and improve trans-European travel, he adds.
The auto parts industry also needs an overhaul.
The parts sector, which comprises 1,000 companies located mostly in the Catalonia and Basque Country regions, is suffering from a fragmented landscape, lack of innovation and operational redundancies, observers point out. Sales have grown under 3% annually since 2001.
To boost fortunes, suppliers must consolidate and specialise in niche products.
“We need a reduction in company numbers,” agrees Gonzalo Garrido, an industry communications expert. “Our companies are good but you need to be more than good these days, you need scale. And the best way to get it is through consolidation,” he explains.
Despite the structural weaknesses, component makers’ sales should jump 5% in 2004, buoyed by a slew of new car contracts scheduled to begin assembly throughout the country, Garrido adds.
Spain’s components industry enjoys “strong manufacturing efficiencies and a highly qualified workforce.” This enables it to deliver specialised products of higher quality than rivals in Romania or Turkey, observers say.
“We are good at making small quantities of specific products, Garrido adds. “We have to exploit this opportunity.”
Bright outlook
To boost margins in an increasingly difficult industry, European carmakers have been moving shop to cheaper manufacturing posts in Eastern Europe and China, leaving governments struggling to stem the tide. But Spain is confident it can keep the industry’s giants within its borders.
“Our medium term position is guaranteed,” says Barrientos. Our manufacturing efficiency and productivity is at its highest levels ever, delivering the best quality/price ratio. Plus, many new labour deals have been signed and this will bring social peace.”
Adds UGT’s Ruiz: “We make very high-quality small and midsize cars and have highly trained workers. We may not be able to compete in price but we can in efficiency. Some countries need 15 workers to make a car, Spain needs only 10.”
The car industry in Spain has waged a “360 degree” turnaround since 1994, Ruiz recalls. It now accounts for 6% of Spain’s Gross Domestic Product (up from 1% then), and 25% of the nation’s exports. Unemployment rates have also dramatically dropped with car making and auxiliary services now occupying nearly 1 million people.
The government has taken heed and is supporting the industry. It has offered to establish an automobile-industry forum that will gather a diverse group of players to discuss problems and future strategy.
Moreover, Industry Minister Jose Montilla has pledged to allocate part of next year’s 25% spending hike in Research And Development (R&D) to the industry. He has also promised to attract foreign investment.
“We are doing very well and, barring a few minor adjustments, there’s no reason why we shouldn’t stay like this in the future,” Ruiz says.
What about the long-term future?
“We’ll never be like Germany, but we can aspire to be the second producers in Europe, ahead of France.”
Ivan Castano
To see the latest data concerning the Spanish auto market and industry, please visit the Spanish vehicle manufacturers’ (ANFAC) website at: http://www.anfac.com/global.htm and select options via the tab near top of page headed ‘ESTADISTICAS’
