Spain Renews Car Scrapping Bonus to Aid Recovery

Spain Renews Car Scrapping Bonus to Aid Recovery

Although Spain has no automobile maker of its own, it hosts 17 factories run by 10 foreign manufacturers. That made it the second-biggest automobile producer in Europe after Germany in 2012.

MADRID -- Spain will renew a bonus scheme for drivers to trade in their old cars to boost a sector that is helping drive an economic recovery, the government said on Thursday.

"We are going to extend the scheme with a further 70 million euros" (US$95 million), Budget Minister Cristobal Montoro told an industry forum in Madrid. The bonus scheme was launched in October 2012 and has already been renewed three times.

Spain is Europe's second-biggest automaker, building nearly 2 million of cars a year, but 90% of them are exported, with home sales weak after a double recession.

The government says exports are one of the keys to the recovery that appears to be starting in the Spanish economy.

"In Spain, the number of cars sold is subnormal. Consumption is low in our country and that is about confidence," Montoro said.

"We can and must support domestic car-buying," he said, adding that automaking is "a leading sector for getting out of the crisis."

He forecast sales of 700,000 cars in Spain this year, compared to 1.7 million in 2007 just before the economic crisis struck.

Mario Armero, vice-president of the carmakers' association ANFAC, said automaking accounts for one in every four euros of Spain's industrial output and 10% of the economy overall.

The number of models of vehicle made in Spain has risen from 34 in 2011 to 40 currently and is likely to be 45 in two years, he added.

Vehicle production in Spain employs 250,000 people and created 2,400 jobs in the first half of this year, he said.

Unions in some cases have had to accept salary cuts to lure production of new models to Spain, helping the country compete with countries with low manufacturing costs in Eastern Europe and Asia.

Spain's unemployment rate stood at 26.2% in the second quarter, the second-highest level in the 28-nation European Union after Greece's rate of 27.9%

ANFAC said on Monday that the industry aims to raise auto production in Spain by nine percent next year to 2.4 million vehicles and to three million in 2016.

Although Spain has no automobile maker of its own, it hosts 17 factories run by 10 foreign manufacturers. That made it the second-biggest automobile producer in Europe after Germany in 2012.

Rising exports of vehicles and other goods have been a rare bright spot for the Spanish economy which is struggling to recover from a 2008 property crash that has pushed up the jobless rate, saddled banks with a pile of bad loans and caused government debt to soar.

The government forecasts that the Spanish economy, the eurozone's fourth biggest, has emerged this quarter from recession and will post growth of 0.7% next year on the back of rising exports and a boom in the number of foreign visitors.

-Katell Abiven, AFP

Copyright Agence France-Presse, 2013

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