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Monthly Report - Focus
The automobile industry: rolling alongThe automobile industry: rolling alongThe automobile industry: rolling along

After having suffered greatly over the last five years, one of the key sectors for Spain's economy is gradually getting back on track: the automobile industry. Including all activities related to automobiles, such as insurance and dealerships, it contributes 6% of GDP, accounts for 16% of all exports and employs close to 7% of the labour force.

The best news comes from vehicle manufacture: after falling by 16.6% in 2012, in the first half of 2013 this has grown by 5.5% and already exceeds 1.1 million units. Should this trend continue, the yearly production will be 2.3 million, a similar level to 2010 or 2011 albeit below 2007's peak of 2.9 million.

This recovery in production is being underpinned by the good performance of exports: the share of exports in production has gone from 81.6% in 2005 to 87.4% in 2012. This partly reflects the slump in domestic demand: in the twelve months up to August, 680,600 new vehicles were registered, a similar level to 1995 and much lower than the 1.7 million registered in 2005. However, although sales are still very weak, some signs of stabilization can now be seen thanks, in part, to incentives to buy vehicles, such as the Plan PIVE (Efficient Vehicle Incentive Programme).

The rise in exports reflects the efforts being made by Spanish firms to improve their competitiveness, to internationalise and penetrate new markets. Firstly, vehicle manufacturing costs have remained lower than their European rivals: while in Spain these rose by 3% between 2009 and July 2013, in Germany or France the increase was 4.4% and 5.5%, respectively. In fact, gains in competitiveness-cost and greater labour flexibility have led several manufacturers to announce plans to increase production in Spain.

A second factor behind this rise in exports is internationalisation: the number of exporting firms from the automobile sector has tripled in the last decade and now exceeds 16,000. Lastly, a third key factor is growing market diversification. Stagnation in traditional European markets has been offset by an increase in exports to other destinations. Of note is the growth in exports to emerging Europe and the main emerging countries in the rest of the world, such as Russia, India and China. These markets are very attractive due to their high growth potential: their motorisation rate (number of vehicles per 1,000 inhabitants) will gradually increase as their middle classes consolidate. In short, the automobile industry is once again rolling along and should become another driving force behind the Spanish economy's recovery.

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