Europe’s southern countries, i.e. Spain, Portugal, Italy and Greece, have been hurt the most by the economic crisis that has hit the Old Continent.
In an effort to reduce the public deficit by €65 billion (US$82 billion) by the end of 2014, the Spanish government decided to increase VAT (sales tax) on most items from 18 to 21 percent starting this month.
As a result, car sales in the first two weeks of September tumbled by 27.6 percent to 12,300 units, according to Spain’s car retailers association Ganvam.
“These figures confirm our fears that the crisis in the sector is becoming more severe”, Ganvam president Juan Antonio Sanchez told Autonews Europe. “If you increase taxes in a market paralyzed by lack of financing, declining consumption and uncertainty about the future, it’s inevitable that demand will fall even further.”
Ganvam points out that it’s not the price hike per se that has reduced demand for new cars, but the psychological effect this uncertainty over the future that has destroyed consumers’ confidence. After all, the average increase is €650 (US$850) per car and some companies have decided to absorb it maintaining the same price.
The problem is much deeper: while car sales rose by 3.4 percent in August, this was the first hike after 25 consecutive months of declining sales. Moreover, the increase was due to buyers trying to avoid the new VAT by purchasing their cars until the end of August.
Spain’s car dealers may be comforted by the fact that they are still doing better than their Greek counterparts.
According to the Greek Association of Car Importers, August sales fell by almost 50 percent (-46.7 percent) compared to the same month last year. The Greek government has increased VAT (sales tax) to 23 percent and the country’s new car market has all but collapsed: sales from January 1 through August 31 are down by 42 percent compared to the same period last year to just 42,072 units, which was already quite bad compared to 2010.
By Andrew Tsaousis
Story References: Autonews Europe
PHOTO GALLERY
