Spain was the 11th largest producer of passenger cars worldwide in 2013 with significant production by the Volkswagen Group, mainly through its SEAT subsidiary, although production of other brands, notably Audi and Volkswagen also takes place. Ford and GM are among other volume car producers in the country. GM produces the Corsa and recently began production of the Mokka at its Zaragoza plant. Ford produces the C-Max, Kuga and Transit Courier at its Valencia plant. Commercial vehicles are also produced in Spain, with IVECO producing both heavy trucks and vans.

Car market recovering slowly

The 2008 European economic crisis hit Spain particularly hard, having a dramatic effect on the motor industry and Spanish domestic car sales. The Spanish Government has successfully stimulated new car sales with a succession of scrappage schemes (PIVE), providing a combination of Government grants and manufacturer discounts to retail buyers who scrap a car that is at least 10 years old. While the scheme is not applicable to business car customers, it has helped to revive domestic car sales. In the first nine months of 2014, 640,673 new cars were registered in Spain, compared with 546,435 in the same period in 2013, a 17.2% increase.

For the month of September alone, car registrations reached 57,010, compared with 45,175 in September 2013, an increase of 26.2%. In many ways, the figures are a measure of how far the Spanish market has fallen in the crisis. In 2007 Spanish car registrations reached 1,939,298. On this data, the market has more than halved since 2007, even with Government support.

Business car registrations rising

Current concerns about the global economy aside, Spain seems to be making a slow but steady recovery. Jorge Bautista, CEO of Alphabet Spain suggests there are currently around 2.2 million business cars on the roads of Spain and around 20% of these are on operational leases. The suggestion of a recovery seems to be supported by improvements in the market, ‘It is important to emphasise that in the first half of 2014, the operational lease sector has registered 30% of the business car registrations, with an investment of €1,500 million by acquiring almost 83,000 vehicles, that is, 17% more than in the same period last year,’ says Bautista. Arval is slightly more conservative, suggesting that there are about 1.7 million business cars on the roads of Spain, a reduction of 6.4% compared with the previous year. But Arval also suggests that current growth is in line with the growth in the car market. With the business car sector growing by 17.5% in September compared with September 2013, putting the total number of new business cars in Spain so far this year at 154,672 units, up 11.6% on the same period last year.

Pedro Malla de la Heras at ALD Automotive in Spain shares the view that things are getting better. He says; ‘Last year, we may say the market improved, not as much as this year, but not on the company side. It decreased, but now this year, it has increased a lot.’

Arval reckons that the business car market in Spain represents around 25% of new car registrations. Jorge Bautista at Alphabet is more specific. So far in 2014, he thinks that the operational lease sector accounts for 16% of the new vehicles registered in Spain.

‘If we consider just the cars that are related to the companies, it’s one third of the total new registrations,’ says Malla de la Heras at ALD. ‘If we consider the total business car market, including car rental, I think it’s around 50% of the total market.’

Although the figures from our different fleet providers vary, it depends how the market is defined.

Volkswagen Group leads the car market

There is more agreement among the companies regarding the most popular vehicle manufacturers. SEAT as a Spanish manufacturer may influence the popularity of the Volkswagen Group. ‘Taking into account the last market figures, the most popular vehicle manufacturers in Spain are Volkswagen (with 4,673 registrations in September), Peugeot (with 4,543 units), Renault (with 4,519), Opel (3,982) and Ford (3,762),’ says Arval. ALD agrees that the Volkswagen Group is the market leader, but also highlights the popularity of Renault and Peugeot. Malla de la Heras also points to conservatism among fleets. Those that have used one brand tend to stay with it. Bautista at Alphabet ranks Renault as the most popular manufacturer followed by Volkswagen and Peugeot.

He is also clear about which were the most popular models on operational lease contracts in the first half of 2014, ‘The Renault Megane, the Seat Leon and the Volkswagen Polo.’ Malla de la Heras focuses on the vehicle type and notes that although SUVs are gaining in popularity, traditional saloon cars are still the most popular body style. Arval focuses on the reasons behind purchase decisions, ‘Really, the medium sized cars under 120g/km of CO2 are the most popular. Why? Because they are exempted from the Spanish registration tax. In other words, less purchase costs and also, lower fuel consumption. This is an important item, taking into account the high price of gasoline.’

Government incentives

All three companies noted the importance of the Spanish Government PIVE and PIMA Aire incentive schemes for the market and the way they have helped to stimulate car sales. Malla de la Heras at ALD notes that, ‘Even though we (leasing companies) are not affected, I think it’s very good. The manufacturers are happier, then the dealers and there is a positive atmosphere around the markets that pushes us in other areas.’

EVs and hybrids growing

There is also an incentive scheme for electric vehicles, as there is in many other countries. Arval noted that the exemption from registration tax for cars emitting 120g/km of CO2 meant that it is cheaper to buy into these low emission vehicles without the expense of hybrid or electric cars. ‘In 2013 the electric vehicle market was only 0.13% of the Spanish car market with a total of 925 registrations, so its importance is still discrete,’ says Bautista at Alphabet. ‘Nevertheless, registrations are increasing this year, with 655 vehicles registered up to the end of August, of which 139 (21%) were registered by operational lease companies.’

‘You need to analyse what kind of use you are going to make of the car,’ says Malla de la Heras at ALD. He says that there are 30,000 hybrid cars on Spanish roads by comparison and they are a popular choice in cities. ‘Just to give you some figures about Spain, ALD only has 73 electric cars while we have 304 hybrids’, and he expects the number to rise, reflecting the greater number of models available in the market.

LCV demand rising

Bautista at Alphabet summarises the responses from all three companies regarding the light commercial vehicle sector, ‘This segment accounts for 11% of all registrations. Of these, 22% are acquired through operational lease, according to the latest data published by the AER (Spanish Operational Lease Association). The most popular models are the Renault Kangoo, Citroën Berlingo, Peugeot Partner II, Volkswagen Caddy and Ford Transit.’

Car sharing interest growing?

A weakened car market could help to stimulate demand for car sharing. Has this happened in Spain? Arval believes there is an upward demand trend, with demand having increased by five percentage points since last year, but that only 16% of Spanish companies have implemented car sharing. ‘Even though we offer the solution to our customers, they still think, ‘one car, one driver,’’ says Malla de la Heras at ALD.

‘In Alphabet Spain we are seeing that our customers are becoming more involved in finding a way to optimise savings with their vehicles, by using for example car sharing services or electric vehicles, as well as by redesigning their car policies and working more closely with their drivers,’ reports Bautista.

Operational leasing grows

The financing of business cars tends to vary according to the size of the company, reports Arval, ‘It depends on the size of the company. While the Spanish SMEs go into self purchase, the big corporations – accustomed to outsourcing – are the best clients of operating leasing. More than 63% of big companies finance the fleet by this method, compared with 13% of the small and medium ones.’ Bautista at Alphabet sees operational leasing as an increasingly popular method; ‘One out of every three vehicles registered during 2014 in the business car market was undertaken using the operational lease formula.’ Leasing accounts for one third of the market, according to Malla de la Heras at ALD.

Modest growth expected

In Spain there are around 400,000 cars on contract hire, so how is this likely to develop in the future? ‘We may grow by 4% this year’, says Malla de la Heras at ALD, ‘And maybe in the next three-four years, an average of between 3-4%. Last year, we touched bottom, now it’s time for improvement’.

Bautista at Alphabet expects similar development, ‘From our point of view, over the next few years the operational lease sector must continue to develop to offer more complete, flexible and innovative mobility solutions for both companies and drivers, generating its customers greater savings, control and security, the main attributes of the operational lease traditional product.’

Arval reckons the prospects look good too: ‘Spanish companies are definitely going to restart the cycle of investment after a period of containment, so the fleet will grow about 10% in the mid-term. In fact, 22% of big corporations plan to increase the fleet size in three years from now.’