Spain car market on a roll as Renault emerges Numero Uno

Spain showed significant de-growth in passenger car sales over the last decade with 1.1 million units sold in 2016, down from 1.5 million in 2005.

The country has gone through a lot of political uncertainty lately. In October 2016, a 10-month political deadlock came to an end when the leader of the Conservative People’s party, Mariano Rajoy, was re-elected as prime minister. With a new minority government in place, it remains to be seen how long he will remain in office. If there are any hiccups en route, there will be new elections before the end of the regular legislative period in 2020.

Despite this political roller-coaster, the economy is recovering strongly and the GDP outlook of the Spanish ministry of economic affairs is positive, predicting sustainable growth. Further, unemployment showed the strongest drop since the beginning of the surveys in 1997 and is expected to decrease steadily in the upcoming years.

Spanish new car sales kept growing in Q4 2016. Both, November (92,653 units; up 13.5 per cent y-o-y) and December (96,886 units; up 9.3 per cent y-o-y) have recorded the highest sales since the crisis hit the country back in 2008. On an average, however, sales are still about 30,000 to 40,000 units below pre-crisis monthly scores.

In total, new car sales grew by 10.9 per cent to nearly 1.15 million units against 2015, demonstrating the second highest growth of the European Union’s top five markets. Despite the double-digit performance, the market failed to achieve even the volumes of 2008 at the beginning of the crisis. In the process, it is ample proof of the potential still inherent.

Many factors supported the development in 2016. One, the 8th PIVE subsidy programme supported the market in the first half of the year until it ceased on July 31. Subsequently, sales slowed down noticeably, especially during Q4.

Two, Spanish households still benefit from low income taxes, low fuel prices, low inflation and improved financing conditions as well as a recovering labour market. Notably, promising economic growth rates act as a stabiliser for both private households and businesses.

Three, Spanish cars have an average age of around 12 years — with an increasing trend. This indicates that there is significant replacement demand, a pull factor assumed to be strong enough to drive new car sales in the future even without support coming from a subsidy scheme.

Private buyers remain the key driver of new car sales in 2016, accounting for every second registered car (6,12,841 units, up 6.7 per cent y-o-y). During the same time, businesses increased their purchases by 15.9 per cent to 3.28 lakh units while registrations by rental companies grew at 16.8 per cent to 2.06 lakh units.

Diesel vehicles continue to dominate new car sales, making up 56.8 per cent of the market. This cannot hide the fact, however, that their share was down 6.1 percentage points from 2015 levels in the wake of the diesel emission scandal. The market share of petrol-driven cars increased by 5.1 per cent to 40.2 per cent in 2016.

Sales of alternative-fuelled cars gained momentum and accounted for three per cent, up from two per cent in 2015. Interestingly, following the expiration of the PIVE plan, sales of electric and hybrid vehicles increased significantly. Between August and December, their share ranged between 3.6 and four per cent.

Volkswagen, which was the leader in the last four years, lost its pole position as Spain’s top brand with 89,012 sales in 2016 ( up 0.8 per cent, y-o-y). The new No 1 is now Renault with 90,503 sold cars, (+17.4 per cent) followed closely by Opel with sales of 89,383 units (+16.9 per cent). Peugeot is in the fourth spot after VW with 83,523 units (+9.5 per cent, y-o-y). Altogether, the top five brands accounted for 37.5 per cent of the total new car market.

The Spanish economy has grown strongly in 2016 and the expansionary phase is expected to continue in the short to mid-term, with domestic demand leading the charge. Despite this, the recovery will slow down as some factors that have contributed to boost consumption, such as low oil prices and lower taxes, will recede.

In addition to the positive economic outlook, vehicle manufacturers’ association, ANFAC is constantly promoting plans to reduce the age of the car parc. If such incentives come into effect, a positive effect on car sales can be expected. Overall, Autofacts anticipates an annual growth of five per cent to 1.2million new car registrations in 2017.

The writer is Partner, Price Waterhouse