A Good Year for Spain’s Automobile Sector

A Good Year for Spain’s Automobile Sector

A Good Year for Spain’s Automobile Sector

The automobile sector is fast regaining its former glory as one of Spain’s leading industries thanks to its increased competitiveness. A government subsidy scheme for car buyers, aimed at re-kindling sluggish domestic demand, has also helped rev up the engines at car plants across the country. And the industry’s contribution to Spain’s export growth, which has fuelled the start of an economic recovery, is gaining momentum.

Almost 90 per cent of the cars made in Spain are destined for export. Production is booming at the country’s car plants, with industry association ANFAC flagging an over 12 per cent increase in the first half of 2014. This is the biggest rise in the last few years. So is the mid-term outlook just as bright for the automotive industry?

It certainly seems so, as the government has recently extended its Plan PIVE  incentive scheme. This offers buyers of new cars who turn in an older car a 2,000-euro rebate, half from the state and half from the car dealer. And overseas manufacturers are choosing more cost efficient Spanish plants over those of their European peers, transferring production of their top models there.

LOWER LABOUR COSTS LURE INVESTMENT

Spain’s car industry was traditionally one of the pillars of the economy, but productivity waned between 2000 and 2007, a period when a property boom took over the driver’s seat. National car makers were gradually bought out by foreign manufacturers or shut down.

Spain now hosts 17 factories run by 10 overseas car makers like Ford, Renault and Opel. Lower labour costs at these Spanish plants have worked in the car industry’s favour over the last few years. The labour market is an estimated 40 per cent less expensive than those of Europe’s other biggest car-making countries like Germany and France. Not surprising then that Volkswagen has decided to concentrate global production of its Polo model at its Navarre plant and increase production of the Seat Leon at its Martorell factory. Both factories are in northern Spain.

CAR INDUSTRY REVIVAL CREATES JOBS

The automobile sector employs some 250,000 people and is a key source of job creation for Spain, still struggling with one of the highest unemployment rates in the Eurozone. An increase in production at the country’s car plants, which analysts consider will be largely for export to high-growth international markets, will have a positive effect on the labour market and the economy in the medium to long term. The automotive sector accounted for 14.3 per cent of total exports in 2013, with overseas sales growing 9.7 per cent from a year earlier, compared to a 7.6 per cent decline in 2012. A true success story!

For more information on investing in Spain, contact corporate law firm Argali Abogados.

 

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