Focus on Portugal: The road to recovery?

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Portugal is the western-most country in Europe, a south-western portion of the Iberian Peninsula. It is far smaller than its neighbour Spain, but both countries are home to a number of automotive manufacturers and suppliers. For Portugal, the majority of production is concentrated on cars. According to the International Organisation of Motor Vehicle Manufacturers (OICA), Portugal produced 115,468 cars in 2014, a reduction of -1.9% compared with 2014, 37,134 light CVs, a -9.1% reduction, and 4,024 heavy trucks, an increase of 38.9%.

By volume, the largest manufacturer is the Volkswagen Group. The Autoeuropa plant on the coast at Palmela, near Lisbon builds the VW Sharan, Seat Alhambra, VW Eos and VW Scirocco. Further north at Mangualde, PSA builds the Berlingo and Partner small van and passenger model. Further north at Vigo, just across the Spanish border, PSA has another assembly plant for the Partner and Berlingo.

To the north-east of Lisbon at Tramagal, Mitsubishi Trucks, part of Daimler Trucks, builds the Canter light truck for Europe and buses. Further north on the coast near Porto, Toyota builds the Hiace van and Dyna light truck in relatively small numbers at the Salvador Caetano plant. Salvador Caetano is the Portuguese importer and distributor for Toyota and Lexus and has a number of other automotive interests including bus and coach manufacture.

According to the Automotive Association of Portugal (ACAP), the single largest destination for Portuguese manufactured vehicles in 2014 was Germany, which took 21.2% of exports, followed by China (16.4%), France (12.7%), the UK (10.4%), Spain (8.6%), Austria (5.8%) and Italy (3.2%).

Portugal also has a thriving components sector, which according to ACAP has grown by 200% in the past 15 years. International suppliers include Bosch, Borg Warner Turbo Systems, Delphi, Visteon, Faurecia, Mahle, TRW Automotive, Yazaki and many more.

 

EV sector investment

Besides component production, Portugal is a source of lithium, widely used in EV batteries. The country is the largest producer of lithium in Europe according to ACAP, with estimated reserves of 60,000 tonnes, according to the US Geological Survey.

Portugal has also made a significant investment in electric mobility through its MOBI.E programme, designed to position Portugal as a pioneering country in the development and adoption of new energy models for sustainable mobility. According to ACAP, any user can charge any vehicle at one of the 1,100 or more charging points, operated by any company with a single subscription. Users can access the network with a pre-paid MOBI.E charge card. The charge points are located in a wide variety of places including houses, private garages, public parking areas, shopping centres, car parks, hotels, airports and fuel stations.

Almost 50% of Portugal’s electricity comes from renewable sources including the Alto Minho wind farm, which with 120 wind turbines is the largest in Europe, according to MOBI.E. Portugal also has one of the largest solar power stations in the world, the Amareleja solar power station and also has a plan to produce over 7,000MW of power from hydroelectric schemes by 2020.

Portugal has offered a series of financial incentives and tax relief for individuals and companies to encourage the take-up of EVs.

 

Registrations

In terms of car registrations, Portugal is roughly comparable with the Czech Republic and Denmark – one of the smaller markets in Europe. For 2016 from January to July (YtD) Portugal registered 134,263 cars according to ACAP, a 16.5% increase over the same period in 2015. Light CVs registered a similar percentage increase with registrations up 15.4% to 19,419.

For 2015 in total, 178,496 cars were registered in Portugal, 25% more than the 142,826 registered in 2014. This made it the highest number of new registrations in Portugal for the past five years. The lower rate of growth in 2016 may reflect a degree of economic uncertainty in the country.

As the table below shows, Renault is the car market leader with 16,698 registrations, a 24.6% increase over the same period in 2015. Peugeot took the second place followed by Volkswagen, with Mercedes-Benz in fourth place, followed by BMW, suggesting that there is a healthy market for premium brands in Portugal. 

Data shows quite strong growth in new car registrations in 2016. Manuel de Sousa, General Manager ALD Automotive Portugal, offered an explanation. “Portugal went through a long period of crisis and difficult access to financing, which has caused a strong contractual extensions period rather than new contracts.

 

Recovering market

“However, for some years now, more revealing from 2015, the market has been recovering and increasing in terms of new contracts/acquisitions, which also reflect the trend and is in line with the reality of the Portuguese new car registrations market. It is also relevant to point out that the rent-a-car market also had a significant impact on the increase in new registrations.”

While SUV registrations are rising strongly across the world and in many parts of Europe, de Sousa explains why other types of car are favoured in Portugal. “Vehicles like station wagons, sedans and hatchbacks tend to be favoured and represent the largest share in operational leasing. Due to the higher taxation, constraints on car policies, higher levels of fuel consumption or CO2 emissions, the SUV and crossover segment has no significant expression in the Portuguese market.” It will be interesting to see if Portugal can resist the SUV/Crossover segment for any length of time, particularly as models become lighter and more fuel-efficient.

In terms of fleet business, de Sousa tells IFW that the market for full service leasing is similar to that in

Portugal’s neighbouring countries, but with one notable difference, fleets prefer to own their cars. “As a result of the experience in other countries and the assessment made of the Portuguese market, we are committed to developing fleet management solutions, where the car belongs to the customer but the management is our responsibility.” The market for this kind of leasing is expected to grow in the future.

Overall, de Sousa reckons that full service leasing accounts for around 16% of the total car market, representing around 21,500 cars YtD in 2016.

“The full service leasing fleet sector has been experiencing growth, year after year, either in new or managed fleet. In terms of global values, Full Service Leasing grew by 5.8% on new contracts and about 4% in installed fleet to the end of May 2016, which confirms the sustainability of this market even in uncertain times. For companies, outsourcing the fleet management has become a reality rather than an internal option.”

 

Light CVs

Renault also enjoyed leadership of the light CV sector with 4,079 registrations YtD, a 25.5% increase on 2015. Perhaps displaying loyalty to the light CVs that are made in Portugal, Peugeot and Citroën respectively occupy second and third places, with Fiat and then Ford making up the top five.

De Sousa suggests that small vans such as the Renault Kangoo and Peugeot Partner sell well in Portugal. This may explain the success of Renault, Peugeot, Citroën, Fiat, Ford and Volkswagen, all of which produce small light CVs. De Sousa sees growth in smaller models too, “The new segments characterized by models like the Peugeot Bipper and Citroën Nemo have been experiencing significant growth.”

Even so he explains that light CVs used to be more popular than they are now. “LCVs lost their relevance some years ago due to the ending of some fiscal benefits. Actually, this segment represents 26% of the total fleet/business vehicle market, which we believe represents the real market needs.”

 

Taxation

Fleet and business cars attract separate taxation from private cars in the form of TA (autonomous taxation). De Susa explains that this consists of, “a tax paid by companies on all the costs of the use of vehicles. This tax is banded depending on the investment value of the vehicle.”

Accountants PWC give a bit more detail. Mileage allowance is taxed at 5%. Company car expenses include depreciation, rentals, leasing, insurance, maintenance, repairs, fuel and taxes. Fully electric cars are exempt as are vehicles that are taxed as income in kind for personal income tax purposes. Otherwise, for cars costing less than €25,000, tax at 10% applies, for cars costing between €25,000 and €35,000 the rate is 27.5% and for cars costing more than €35,000 the rate rises to 35%.

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