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Spain's booming used-car market worries automakers

At least one part of the Spanish market is healthy -- sales of used cars.

Spain's registrations fell 4.8 percent last year with sales of new cars to private customers dropping by 12 percent. However, there was a 17 percent leap in demand for vehicles over 20 years old.

Sales to private buyers started this year even worse than in 2019 with registrations down 14 percent in January versus a 7.6 percent drop in total registrations.

Industry association ANFAC said it is a worrying sign for the industry if families "prefer to buy an old car rather than a new one."

Sales to private buyers have been squeezed for a while now because private customers are increasing getting a new car through a long-term rental contract but this explains only part of the drop in demand. The decline of the purchasing power of families and political uncertainty are explanations frequently quoted by experts.

Another reason that has been touted is that customers buy an old car to cash in when there are programs offering incentives to swap old models for new ones. But since the last scrappage program was in 2016 and any future one would likely be for the purchase of an expensive electric car, this seems unlikely, an ANFAC spokeswoman said.

Whatever the reason, Spain seems to be doing little to remedy the situation. The country's tax on the resale of used cars is low at a maximum of 8 percent of the car's market value. Add to that the fact that new-car prices generally are about to rise and the reason for buying an old car gets stronger.

European Union efforts to tackle climate change are forcing automakers to turn to electrification to reduce the CO2 emissions. Automakers are adding relatively inexpensive mild hybrids, but also more expensive plug-in hybrids and full-electric vehicles.

This means that small cars that were once the go-to choice of those on a budget, such as the Opel Karl, Ford Ka+ and Fiat Punto, are no longer profitable and have been axed.

What is happening in Spain could become a wider European trend, especially as sales of new internal combustion cars are likely banned across the region in the long term.

The used-car trend is worrying industry executives.

Announcements by several countries that they will ban the sale of combustion vehicles by 2030 or soon after would likely mean that people will keep their cars longer, Thomas Schmid, Hyundai Europe's former chief operating officer, said last year in an interview with Automotive News Europe.