24 October, 2013

By VIVA Team

Despite Spain's excellent car-making industry, domestic demand remains low

The bonus scheme that encourages Spain’s car owners to trade in their old vehicles in exchange for a new car has been renewed by the Spanish government.

Originally launched in October last year and renewed three times already, the bonus scheme will be boosted by the injection of €70 million in an attempt by the government to shift Spain’s moribund domestic motor industry into a higher gear…

Despite being Europe’s second-largest car maker, Spain actually exports 90% of all cars it makes. Since the recession, annual new car sales have fallen from a 2007 peak of 1.7 million to just 700,000 predicted for 2013.

And although Spain’s burgeoning car export industry is key to the country’s economic revival, improved domestic demand would aid the recovery too.

”The number of cars sold in Spain is subnormal,” said Spain’s Budget Minister Cristóbal Montoro at an industry forum in Madrid this week. “Consumption is low in our country and that is about confidence. We can and must support domestic car buying.”

Figures from Spain’s car-makers’ association ANFAC show that the auto industry generates one in every four euros of Spain’s manufacturing output, and accounts for 10% of the country’s overall economy.

Currently the country makes 40 different models of car, up from 34 two years ago and predicted to rise to 45 by 2015. The sector employs a quarter of a million people, and even added more than 2,000 jobs in the first quarter of this year. Although Spain’s flagship car brand SEAT is now owned by German automobile giants Volkswagen, there are still 17 car making factories in the country, putting Spain just behind Germany as the car-making capital of Europe.

However, despite the bullish outlook, many workers’ unions in the car industry have negotiated drastic pay cuts in recent months in order to protect employment. At the same time, the price of second-hand cars in Spain remains above the European average, with the resale market relatively dormant.

“The auto industry is counting on Spain,” said ANFAC’s Vice President, Mario Armero. “We are sure we will play a leading role in getting out of the crisis.”

To show they mean business, ANFAC announced last week that the auto industry hopes to increase production by nine per cent in 2014, which would mean an output of 2.4 million vehicles.

The revitalised car scrappage scheme will hopefully help grease the wheels towards making that target a feasible reality.