Spain’s Auto Makers Call for More Government Action, Investment

MADRID – Auto makers are calling on the government to pump up infrastructure investment, cut taxes and apply additional cost-control measures as a further shot in the arm to the industry here.

The government in September launched a new scrappage incentive backed by €75 million ($96 million) in state funding and a matching €75 million from the industry to boost local sales. But ANFAC, the group representing auto makers with a manufacturing presence in Spain, says that isn’t enough to turn around the flagging industry.

The organization is calling on the government to back an expansion plan targeting local production to reach 3 million vehicles, exports to hit 2.5 million and sales to increase to 2 million – more than 60% passenger vehicles.

First-half 2012 production totaled just 1.1 million units, and forecasts suggest 2 million vehicles will be built during the entire year. That’s well down from 2000-2004 levels, when output topped 3 million annually. Sales through October were off 12.1% from already-depressed like-2011 results.

ANFAC proposes a number of actions that could be taken to improve industry prospects and says €500 million ($641 million) in government funding would be needed to back the plan. That outlay immediately would be recovered from profits generated by the plan, the group says.

New companies would be created as a result of the program, Spanish exports would increase 4% and the country’s gross domestic product would rise 1%, ANFAC forecasts.

Measures suggested by the auto makers group would not be easy to implement, as they would require the combined intervention of eight national departments, the 17 Spanish regional governments and many municipalities.

Among the proposals is elimination of the registration tax applied to the purchase of new passenger vehicles, a move that could have an effect on fleet fuel economy.

Cars emitting less than 120 g/km of carbon dioxide already are not subject to the registration tax, which starts at 4.65% of the acquisition price for vehicles emitting 120-160 g/km CO2 and tops out at 14.75% for vehicles above 200 g/km CO2.

Another hurdle is regional and municipal debt. The central government is pressing for reductions and cars, taxed in Spain nine different ways, are considered a key source of the revenue needed to accomplish that.

ANFAC also suggests a price freeze on electricity, as an 8% hike in costs in recent months is making Spanish plants uncompetitive.

Development of rail corridors and implementation of other logistic measures could cut €10 billion ($13 billion) in transportation costs, ANFAC says, making local production more attractive and profitable.

The group wants to dovetail its 3 Million Plan with the Cars 2020 Plan launched earlier this month in Brussels.

“It is the most appropriate time to reinforce our automotive industry, as many auto makers have just showed their interest for our country, announcing investments for €2 billion ($2.6 billion),” says Mario Armero, ANFAC executive vice president.