Volkswagen’s Barcelona Plant Most Productive in Spain

Volkswagen's Barcelona Plant Most Productive in Spain

Volkswagen’s Barcelona Plant Most Productive in Spain

The European car industry has been struggling for several years, but Spain’s auto assembly plants are bucking the trend. They are increasing production, winning new contracts and attracting fresh international investmentSo what’s the secret to their success?

More than anything else, it’s their competitiveness compared to their European peers. The labour market is an estimated 40 per cent less expensive in Spain than in other big car-making countries like Germany and France. So it’s no surprise that major manufacturers like Volkswagen and Ford are moving more of their production to Spain.

In the first half of 2014, the Volkswagen plant near Barcelona was the most productive in Spain, with output rising 11 per cent to 239,144 units from a year earlier. This was in part due to the German firm’s decision to hike production of its Seat Leon model there. Its factory in Landaben, in the Navarre region, clocked up an impressive 15 per cent rise in production to 175,272 units.

SPAIN AUTOS DRIVE ECONOMIC RECOVERY

Formerly one of Spain’s growth drivers, the auto industry lost its shine between 2000 and 2007, overshadowed by a property boom. Production declined sharply and national car makers were either bought out by foreign manufacturers or shut down. But although it now has no homegrown car manufacturer, the auto industry is one of Spain’s biggest and is driving GDP growth.

The European auto market’s slump took demand to a two-decade low in 2008, leading to widespread losses for vehicle makers and job cuts. Fighting to cover the hefty fixed costs of their manufacturing base in the region, overseas industry heavyweights turned their sights to Spain. With its lower labour unit costs, a by-product of the government’s austerity plan, the country’s plants are more cost effective. Last year, Ford announced plans to boost production of its Kuga SUV at its factory in Valencia by 10 per cent. And a shift in focus to production for export to high-growth markets will guarantee the industry’s continued resurgence.

SUBSIDIES BUOY DOMESTIC DEMAND

It’s not just overseas demand which is keeping Spain’s car assembly plants busy. Earlier this year, the government extended its Plan PIVE subsidy, offering buyers of new cars a 2,000-euro rebate if they turn in an older vehicle.

In June, new car sales surged 24 per cent for a tenth consecutive month of year-on-year gains. First half growth was 18 per cent. PSA Peugeot Citroen and General MotorsOpel all fared better in Spain than in France, according to industry data.

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

Leave a Reply