Spain, in the tail: A year later, the demand for vehicles does not recover

One year after the reopening of the markets and the resumption of activity in the vehicle factories, the evolution of sales is quite different in the main countries of the European Union.

Despite the fact that there is still a long way to go, the recovery is already beginning to be seen in Italy and France if the data from this year are compared with the previous year. On the contrary, in Spain the recovery is much slower due to the ineffectiveness of the incentive plans, as well as not having modified the emission tranches of the registration tax. Situation that has further aggravated the problem to get out of the crisis.

Now, we must bear in mind that there is a catch. And it is that in March of last year the factories of a large part of Europe, as well as the different concessionaires saw their activity paralyzed, due to the different measures carried out by the respective executives to contain the advance of the pandemic.

It goes without saying that Italy and Spain were the two European countries that suffered the most from the consequences of the first wave. Despite this, the recovery of demand in both cases is quite far apart.

And good fault of this have had the different plans carried out by the governments to attract the demand of one of the sectors that is considered essential to take the pulse of the economy. The first to take the lead was French President Emmanuel Macron, who announced a “historic” plan of 8,000 million euros that would go to the automotive sector to alleviate the damage caused by the pandemic. Of that amount, 7,000 million would go to the production of electric vehicles and another 1,000 will serve to stimulate demand. Said plan was communicated a day before the announcement of the new strategy to be carried out by the Renault-Nissan-Mitsubishi Alliance. A new cooperative business model that aims to enhance the competitiveness and profitability of its three companies.

Soon after, Germany announced a € 130 billion boost package to fight the crisis caused by the pandemic. Among these measures was the reduction of VAT from 19% to 16% and from 7% to 5% for the reduced rate, which expired on December 31, 2020. In addition, the premium for the purchase of an electric vehicle was doubled, going from 3,000 to 6,000 euros, while dealers would contribute another 3,000 euros. In this way, the aid for the purchase of an electric car amounted to 9,000 euros until December 31. The words of the Bavarian president, Markus Söder, rang out loudly, saying that “it cannot be that France spends 8,000 million euros on the car and Germany nothing; the car is the heart of our economy.”

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Then the Spanish Government acted and announced aid of 3,750 million euros for the reactivation of the automotive sector. Among some of the measures implemented, the second edition of the Moves plan stood out, which had 100 million euros and which still have funds left. Likewise, the Renove plan was announced, which had 250 million euros and included incentives for the renovation of the park. These announcements caused registrations in July last year to increase by 1.1% year-on-year. A figure that since then the sector has not seen equal, only in December 2020, when it equaled the sales of cars and SUVs of the same period of the previous year. Despite having consumed only 20% of these funds since the sector asked the Executive for its continuity, the plan ended on December 31, 2020 with 200 million euros unspent.

Spain takes longer to recover than its European partners

As if the situation were not a little alarming, on January 1 of this year the new cycle of homologation of consumption and emissions came into force, called WLTP. Spain was the only major European market that did not modify the sections to prevent vehicles from becoming more expensive in value overnight, as finally happened. And it is that while Germany lacks this tax, France, Italy and Portugal modified the sections to prevent this new cycle from dissuading buyers, as it ended up happening in Spain.

Such was the seriousness that the sector as a block went out to ask the Government to clarify the type of mobility you wanted and decide if you wanted to bet on a car model that is heading towards electrification or on another in which vehicles are not wanted. All this after the Congress of Deputies rejected at the beginning of December with the votes against the PSOE, Podemos, ERC, Más País and Bildu an amendment to the project of General State Budgets for 2021 that intended to modify the registration tax for that the new European WLTP emission regulations had no “fiscal impact”.

Given this situation, the sector already anticipated that the path that the automotive industry would have to travel to recover demand would be complicated.

Slow recovery

Five months after the start of the financial year, certain improvements are observed in new vehicle registrations in some European markets. Despite the fact that a year later the main car seats continue to register declines in sales, these are beginning to approach the levels recorded two years ago.

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However, Spain is still far from this goal compared to Italy, France and Germany, which in the accumulated accumulated of the first five months of 2021, decreases of 18.9%, 22.7% and 26.7%, respectively. Spain, for its part, accumulates a 35.9% drop in registrations between January and May (see graph). So much so that in the last twelve months (June 2020 to May 2021) vehicle registrations in Spain fell the most compared to their European counterparts on seven occasions. In fact, in just two months (July and December 2020), sales of passenger cars and SUVs in Spain increased or remained flat.

If the registrations of the first five months of the year are compared with those registered in the same period of the previous year, Italy is the clear winner, with a 63% increase in new vehicle sales. It is followed by France, with an increase of 50%; Spain, with a rise of 40%; and Germany, with 12.8% more sales of passenger cars and SUVs.

To this situation we must add the global shortage of semiconductors which the industry has been facing since the end of 2020. So, when factories began to regain normal production rates and demanded the same number of components again, there were none. They had been left by the technology industry boosted by greater demand due to the increase in teleworking.

In this way, the different European factories have been forced to paralyze production, given the lack of semiconductors. The truth is that it is difficult to know when the supply of these chips will be rebuilt. From the Spanish employer’s association of automotive suppliers (Sernauto), its president, María Helena Antolin, acknowledged this week that it is difficult to guess when it will be possible to return to normality, “although the data tells us that there will be problems until the end of the year of supply”.

The own employers’ association of manufacturers (Anfac) has delayed the recovery of vehicle demand until 2023 to reach the levels prior to the outbreak of the pandemic, when 1,258,260 units of cars and SUVs were registered. For this fiscal year, the employer’s association estimates that the market will grow this fiscal year by just 8%, with about 925,000 new registrations. This is 26% less than in 2019, the last year before the pandemic.

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Uncertain future

For the remainder of the year the outlook is cautious. And it is that on the horizon is looming registration tax freeze, since the opposition approved an amendment of the PDeCat in the new Law of measures to prevent and fight against tax fraud. This amendment was accepted with votes from the PP, Vox, Esquerra Republicana, Ciudadanos, PDeCat and the PRC. The PSOE and United We Can voted against and the PNV abstained. Now it has to go through the Senate for this measure to be ratified or not.

We will also have to be aware of how electrified vehicle registrations evolve. In early April, the Ministry for Ecological Transition approved the third edition of the Moves plan. On this occasion, it has a budget allocation of 400 million euros, expandable up to 800 million if demand requires it. In addition, its validity is extended until December 31, 2023. Despite the announcements made by the sector, the new edition will also distribute the money based on the population, instead of on the market volume of this type of vehicle. To date, no autonomous community has published the rules for the aid, something that is considered essential for the success of this new incentive program. In this regard, the distribution employer (Ganvam) and Aedive have already asked the communities for “agility” to implement these aids in order to reactivate demand and contribute to achieving decarbonisation objectives.

And this will be one of the key aspects, since a significant demand for electrified vehicles is needed to be able to carry out investments related to the development of this technology. The president of Seat, Wayne Griffiths, has already warned the Government that “if electric cars are not sold in Spain it is not necessary to produce them”, in reference to the production of batteries in Spain that is part of the Perte (strategic project for the recovery and economic transformation) of the electric and connected vehicle. So far this year, sales of electric passenger cars have reached a market share of 1.86%, only ahead of gas-powered models (1.28%).

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