Suppliers Feeling Pain of Shrinking Spanish Output

MADRID – Spain, the European Union’s second-biggest automobile producer, may have trouble retaining that ranking among the region’s leaders this year and beyond, with local suppliers already feeling the impact of the market’s continued decline.

With a total of 1,979,103vehicles assembled last year, according to WardsAuto data, Spain is in a battle to retain its second-place position for the fourth year in row, following its jump ahead of France in 2009.

Final medium- and heavy-duty data for France has not been released yet, but based on output of 1,967,765light vehicles, the gap with Spain is nominal at best, and France already could be back in second place. Both countries remain a long way from leader Germany, which built more than 5 million vehicles last year.

Ever since Spain edged past France, local new-vehicle demand has been falling, with first-quarter sales plunging to levels not seen in 25 years. That could be the tipping point that puts Spain permanently behind France, and analysts say it will be difficult for the country even to remain in a top-three position much longer.

“We need to increase the competitiveness of our plants if we want to attract new investments and maintain or increase our current production level,” says Mario Armero, manager director-ANFAC, the association of auto makers that build vehicles here.

A report published by Roland Berger Strategic Consultants concludes Spain production will not return to 2008 levels for several more years, and the firm forecasts a declining global importance for Western Europe overall in passenger-vehicle production.

The consultancy predicts automobile production in Western Europe will decline to 13% of the world’s total in 2016, from 23% in 2007.

A WardsAuto/AutomotiveCompass forecast shows Western Europe accounting for 14.6% of global production this year, down from 16.2% in 2012. It puts the region at a similar 13.9% of the word’s output in 2016, as emerging markets continue to account for a bigger share of the total.

The capacity shift to Asia will further impact local suppliers already under pressure from the shrinking European market.

Spanish suppliers generated sales of €27.4 billion ($35.2 billion) in 2012, down 7.1% from 2011, according to SERNAUTO, the Spanish association of component suppliers.

Exports in the sector fell 3.8% to €17.9 billion ($23.0 billion), an indicator of how much the Spanish auto industry has relied on overseas markets during the last several years.

Of the remaining revenue, €5.4 billion ($6.9 billion) came from OE sales and €4.1 billion ($5.3 billion) from the aftermarket. OE sales were down 15.8% from 2011 levels, and the aftermarket business declined 8.1%.