Auto Makers Turn Thumbs Down on Spain’s Aid Plan

MADRID – Industry players say the Spanish government’s plan to make €4.07 billion ($5.12 billion) available to help auto makers get through the current economic slump doesn’t go far enough because it lacks incentives for consumers to purchase new vehicles.

“The ‘Integral Plan’ approved by the Spanish government doesn’t include any direct stimulus to (car buyers), as the plans from other European countries do,” says Luis Valero, director of ANFAC, the association of auto manufacturers in Spain.

ANFAC estimates if consumers were given a €1,500 ($1,885) incentive to purchase a new vehicle, it would generate additional demand for 163,000 units this year.

In addition to stimulating the market and aiding the auto industry, Spain, itself, would generate additional revenues through the value-added tax on new-vehicle sales, the group points out.

Vehicle sales fell 41.6% in Spain in 2008 and the trend has continued into 2009. Deliveries declined 41% in January and are expected to slip 40% vs. year-ago in February.

Until now, Spain has been holding onto its position as Europe’s third-leading vehicle-producing nation, despite its geographical position far away from the continent’s industrial center.

But if domestic demand continues the current downward spiral, the country is likely to drop in the rankings as production increases in the still-emerging Eastern European markets.

ANFAC’s Valero: Sales incentive would boost demand 1630,000 vehicles this year.

“We are in an exceptional situation that needs exceptional measures,” says Valero, who points to vehicle sales incentives already launched in France, Germany, Italy, Romania, Austria, Portugal and the U.K.

The Spanish aid package does includes €1.2 billion ($1.5 billion) for the VIVE Plan that took effect last September to encourage consumers to trade in vehicles more than 15-years old on a new, more fuel-efficient model. Buyers could get favorable financing on loans up to €20,000 ($25,138), including E5,000 ($6,285) of that at 0% interest.

The VIVE plan initially was a disaster, with few consumers opting into the program in November. The government then revised the rules, expanding its offer to trade-ins 10-years old or more and loans up to €30,000 ($37,707).

That has resulted in more than 9,000 vehicle sales since December, about 70% of those occurring in the second half of January.

Another €800 million ($1 billion) in the new Integral Plan is aimed at improving the competitiveness of local auto makers by providing soft credits on investments in Spanish factories.

Valero points out that other aid included is pointed toward infrastructure investment and making financing available to small and medium-sized companies, saying that shouldn’t be viewed as funding designed to stimulate the automotive industry specifically.

Meanwhile, the European Commission is asking for more information about the program to determine whether it fits in within the European Community’s legal guidelines.