Spain’s VAT increase and its effect on car sales
The major economic problems of Greece are very well-known by this time, but what is not as well-known is the fact that Italy, Spain and Portugal as well are facing some very dire financial straits as well, with some of them being seen as the next one whose economy will collapse in Greek style.
In order for that to not happen, all of these countries have started introducing austerity measures, which include increased taxes.
Trying to reduce the public deficit by sixty-five billion Euros by the end of 2014, the Spanish government has finally decided to increase their VAT for most items from 18 to 21 percent. And this has indeed had a direct and quick result in terms of car sales, ever since the VAT increase came into action since the 1st of September. According to Spain’s car retailers association, Ganvam, car sales have fallen by 27.6 percent during the first two weeks of the month to about 12,300 units.
These figures confirm the overall fears that the crisis in the car selling sector is only getting worse. The problem being that the market was pretty much in big problems anyway, this only compounded the issue.
It is interesting to note however, that Ganvam doesn’t point the actual price hike as being the leading cause for the drastic reduction in sales numbers, instead they say it has more to do with the psychological effect of an uncertain future that is in turn destroying consumer confidence – and they’re pretty much right in that respect because the average increase per car was of only about 650 Euros and actually some companies have decided to absorb the increase and maintain the same prices.
The problem is much larger however when u consider that till last August, they saw twenty-five consecutive months of declining sales, and the only reason why the sales rose by 3.4 percent in August is because people wanted to avoid the VAT increase.
The only silver lining of Spanish car dealers is that they’re still in better shape than their Greek counterparts.
