“Maximum alert!” That’s the state Spain’s automobile industry is in after sales plunged 24% in May to a cumulative drop of 14.3% year-on-year in the first five months of 2008, dealer group Faconauto has warned.

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In a statement last night, the country’s top dealership federation urged the government to introduce “profound” measures to help boost sales and avoid a “disaster” by year end when registrations could plummet over 12% for all vehicles and 20% for passenger cars.


The gloomy prediction is much worse than earlier forecasts of a maximum 4% drop in car sales this year.


Spain, home to Europe’s third-largest car market, is suffering from a deepening economic crisis triggered by the collapse of its long-overheated housing market. That, coupled with soaring interest rates, inflation and tougher credit conditions is keeping consumers away from dealers, despite aggressive discounting campaigns both from the retailers and the major brands.


A desperate Faconauto reiterated the need for a new state campaign to promote the retirement of older (over 10 years) cars and commercial vehicles by providing tax incentives and other financial assistance for the purchase of new or near-new models.

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The state’s former plan to do this, dubbed Prever, was scrapped last year after great success. The government has refused to say whether it will launch a replacement programme and officials were not available immediately to comment.


If the government doesn’t help, sales could fall sharply in the next two years, Faconauto warned.


Tightening credit in a market where eight out of 10 cars are financed is making it very difficult for consumers to buy cars.


The industry’s so-called “intention to buy” statistic will fall 33% this year to hover under the EU’s average, according to Faconauto.


Ivan Castano Freeman