Spain’s Scrappage Incentive Pumps Up September Sales

MADRID – Only two weeks since its launch, the Spanish government’s PIVE Plan scrappage subsidy is reviving new-car demand here to unexpected levels.

Showroom traffic has increased 140% in the first two weeks of October with more than 70,000 customer visits, and data from the month’s first 10 days show orders have jumped 150% from September levels, according to GANVAM, the trade group that represents automobile dealers, repairers and traders.

Traffic on automotive websites is said to have tripled, with some brands topping 500,000 visitors so far this month. The website for Spain’s Institute for Energy Diversification, which lists fuel-efficiency ratings for vehicles on the market, has registered more than 20,000 downloads, GANVAM says at a conference it hosted here.

The €150 million ($197 million) PIVE Plan, announced only two days before its launch in the last weekend of September, is being funded equally by the Spanish government and auto makers selling vehicles here.

The program provides a €2,000 ($2,600) credit to new-vehicle buyers, with the amount deducted immediately from the invoice at the time of sale in exchange for a trade-in that is at least 12 years old. That means there’s enough money to subsidize demand for 75,000 vehicles.

Some auto makers and their dealers are reinforcing the PIVE incentives with their own promotional campaigns, offering incentives as high as €5,000 ($6,600).

Dealer morale has rebounded following a devastating September when only 35,206 cars were sold, one of the market’s worst months in history.

ANIACAM, the local auto importers association, says about 38,000 vehicles older than 12 years were being scrapped each month ahead of the PIVE Plan, which it expects will raise that rate 20%. That should boost sales to 720,000 new vehicles in 2012, from the 700,000 previously forecast, the group says.

Estimates are the additional sales derived from the program will enrich the Spanish Treasury by €200 million ($263 million) in 2012 via extra value-added and registration taxes collected. Spain recently hiked the VAT three percentage points to 21% of a vehicle’s purchase price. Buyers also must pay 8% of the price in registration taxes.