Spain launches €4.2bn auto industry stimulus package

Spain's government has recently announced its intention to launch a stimulus programme to help the country’s struggling automotive industry climb out of the hole left by the coronavirus outbreak.

Roughly 70% of the funds allocated will be earmarked for the sector’s “value chain” and other parts will be invested in renewing existing car fleets and jump-starting public transport, Spanish Prime Minister Pedro Sanchez announced in a speech on Monday.

There are even plans for a part of this package to go towards replacing older cars with greener, more energy-efficient and newer models.

The automotive industry forms a solid backbone of the Spanish economy and will be vital once its sectors begin to fully reopen.

A current estimate places it as roughly 10% of the country's total annual GDP and it is the second biggest automotive industry in Europe behind Germany, and the eighth largest in the world.

Some 600,000 workers are currently employed in the sector, meaning that providing a package to help kick-start it is essential for a large part of the population.

The country's automotive sector produces some 3 million cars annually.

The first instalment of the stimulus, totalling €1.535 billion will be disbursed this year, according to PM Sanchez.

Spain currently has no domestic carmakers, although large foreign companies including Volkswagen, PSA Group, Renault and Ford have plants in the country.

CIE Automotive SA and Gestamp Automocion SA, both listed in Madrid, are among the biggest Spanish car-part makers.

Spain was one of the first countries to be the hardest hit by the Covid-19 pandemic, and also imposed one of the strictest lockdowns.

Data from John Hopkins University shows more than 243,000 people in Spain have been infected by the virus, and it has claimed the lives of more than 27,000 in total. 

The Spanish economy shrunk by 5.2% in the first quarter of 2020, and the Bank of Spain is bracing for a fall between 6.6% to 13.6% this year.

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