MADRID – Vehicle sales in Spain continue shrinking in the wake of a tax increase imposed just as government incentives for new-car purchases expired.

“Currently, a 68% of the auto dealers are losing money,” says Juan A. Sanchez, CEO of GANVAM, the main dealers, vendors and repairers association of the Spanish motor industry.

A study conducted for GANVAM by Snap-On Business Solutions attributes the ongoing losses to the end of the government’s 2000E Plan, which offered incentives to new-vehicle buyers with the goal of scrapping older, higher-polluting cars.

The incentives plan ended in July 2010, when the government raised the value-added tax on new-car purchases from 16% to 18%.

Sales have fallen every month since then with the exception of August, when car and light-truck deliveries increased 6.6% compared with year-ago, according to WardsAuto data.

September’s 1.7% decline pushed Spanish sales to their lowest level since 1990.

The study shows new- and used-car sales as a share of dealers’ gross income slipped to 73% in the year’s first half, compared with 80% in like-2010.

Deliveries, however, represented only 31% of dealers’ net income for the first six months.

Sanchez says discounts and incentives in part are responsible for the drop in sales as a percentage of income. But he says cost-cutting helped profit margins rise 2.7% in the year’s first six months.

Parts and service contributed to just 35% of gross income but 69% of net income in the year’s first half.

Aftermarket earnings have increased, but Sanchez believes sales in that segment could start losing momentum as owners of aging vehicles only make critical repairs.