Spanish Automakers’ Craving for Subsidies Continues

MADRID – The Spanish auto industry shows no signs of beating its addiction to subsidies.

The government recently approved €175 million ($218 million) in assistance to new-car buyers in 2015, the seventh such iteration of the Incentive Program for Efficient Vehicles (PIVE). The same amount was appropriated for this year but funding ran out in late October, prompting the industry to ask for a special subsidy program covering the last two months of 2014.

While the subsidies have met their overall goal of renewing the national fleet with safer, more-efficient vehicles – and stimulating sales in a market only recently taking steps toward recovery – the government has spent €715 million ($890 million) on PIVE programs since 2012.

The 2-month program sought by the automakers, dubbed PIVE 6.5 by some in the media, reflects the industry’s dependence on the subsidies. After the government announced the 2015 program, industry officials expressed concern that without government aid available, sales could plummet in November and December, crucial months for meeting sales goals.

Industry sources say €60 million to €70 million ($75 million to $87 million) in subsidies would be needed over the year’s final two months for automakers to reach their full-year target of 850,000 deliveries.

“Without PIVE for November and December it could be very difficult even to reach 820,000 units in 2014,” says German Lopez, president of ANIACAM, the Spanish association of auto importers.

“It is very important to reach 850,000 cars sold in 2014 because it will help to convey an idea of economic recovery and increased consumer confidence, as Spanish citizens consider the automobile as one of the major indicators of the economy,” he says.

Prior to the 2008 financial crisis as many as 1.5 million vehicles were sold annually in Spain. There is general agreement that level will not be reached again. But an official with the Ministry of Trade recently said sales might have to reach 1.2 million before the subsidies would be discontinued.

Assistance to the industry has begun drawing similar demands for help from other sectors. Jose M. Riano, general secretary of ANESDOR, the trade association representing the 2-wheel motorbike and moped industry, complains inadequate government subsidies have cut Spain’s share of the market from 16% in 2007 to less than 10% now.

“We also have the right to renew the fleet of 2-wheeled vehicles, increasing safety and reducing their seniority,” Riano says in making the same argument used by the auto industry.