Spanish Auto Market Pulling Out of Long-Standing Rut

Spain sales rate half that of ldquocountries in our orbitrdquo Sanchez says

MADRID – Despite being propped up by government subsidies and still far from its best days, Spain’s automotive market is continuing its recovery.

Juan A. Sanchez, president and CEO of GANVAM, the main Spanish association of auto dealers, vendors and repairers, predicts new-car sales of 860,000 units in 2014, followed by 940,000 in 2015 and more than 1 million in 2016.

Dealer profits will average only 1%, but by contrast, six of 10 dealers lost money just two years ago, he tells Spanish media. He notes sales in the pre-recession year of 2007 exceeded 1.6 million cars, or 86% more than this year’s projected volume, and adds 50,000 jobs and 3,000 small and medium-size companies went under during the years of economic instability.

Sanchez welcomes the enactment of the seventh edition of the PIVE program designed to take cars older than 10 years off the road by subsidizing the purchases of new, more-efficient and safer vehicles. The government has appropriated €175 million ($218 million) for the program, which Sanchez says is a key factor driving his sales forecast.

“With the current 18 new cars sold per 1,000 inhabitants, and still far away from the 25 that could mean a normal market, Spain is well below the countries in our orbit where 35 vehicles are sold per 1,000 inhabitants,” he says.

The government also will provide subsidies for the purchase of 7,500 light-commercial vehicles in 2015, but there is no word on whether funding for a third program subsidizing purchases of electric vehicles will be replenished. An average 80 EVs were registered monthly this year.

Other issues of concern for auto retailers are the difficulties faced by small and medium-size companies in obtaining financing for vehicle purchases; tax reforms including abolition of registration and patrimonial-transfer taxes; and an “underground” used-vehicle market in which professional traders pose as private individuals, a practice Sanchez says accounts for 170,000 vehicles, or 10% of annual used-car volume.

The GANVAM executive adds thousands of illegal auto workshops have cost legitimate businesses €3.5 billion ($4.4 billion) in income and deprived the government of €230 million ($286 million) in taxes over the past six years.