Spanish Sales Dry Up With No End in Sight

MADRID – The steady shrinkage of new-car sales in Spain could force as many as 1,000 dealerships to close this year.

Deliveries fell 21.7% to 56,250 units last month for the market’s worst April ever, and marked the 22^nd consecutive month of decline. Sales in the first two weeks of May were down 25.7% year-on-year, to 19,910.

The results reflect the ongoing deterioration of the retail environment, says Antonio Romero-Haupold, president of Faconauto, the Spanish association of official auto dealers. “Seventy-five percent of the Spanish auto dealers have lost money during the first four months of 2012 and 2,500 have disappeared since 2008, with 40,000 people losing their jobs,” he says.

Sales could be further threatened as the debt-ridden Spanish government considers raising the value-added tax from the current 18% to between 20% and 22%. “It is proved that (by) increasing taxes, the car sales are not going to increase,” Romero-Haupold says.

The budget crises in Spain and elsewhere in Europe also could damage vehicle production in the country. Exports from Spanish factories are declining, and weak local sales could discourage auto makers from maintaining operations in what is considered a peripheral market.

As a consequence, the Spanish car factories are at risk as auto makers such as Opel, Vauxhall, PSA Peugeot Citroen and others are immersed in a deep industrial reorganization all across Europe.