Spain ranks as one of the top five automobile manufacturers in the European Union and one of the top eight worldwide. As a member of the European Union, Spain offers a favorable import climate and increased market competition in the automotive industry which includes both domestic manufacturers such as Seat and foreign players like General Motors and Ford. Automotive imports for 2007 are estimated at more than $58 billion, with imports from the U.S. totaling more than $775 million.
This report provides an overview of the automotive repair and maintenance sector with special attention to the emerging customization sector (known as “tuning” in Spain) and the areas that offer the best opportunities for U.S. automotive exporters.
The automotive repair and maintenance sector is expected to grow for the coming years as a result of the current economic crisis which has fueled demand for parts and services to upkeep older vehicles in lieu of purchasing new ones. The aging automobile fleet coupled with strict government inspections and increased market competition should result in 10 to 15 percent market growth. Growing demand for U.S. imports will also boost U.S. presence 10 percent in the next three years.
Industry association representatives are optimistic about growth in the repair and maintenance equipment market. Emerging trends -the aging of existing automobiles, stricter enforcement of government technical inspections, new laws and structural changes aimed at market competition1 and consumption of new vehicles - will encourage market demand for auto repair and maintenance equipment make it one of the most attractive subsectors in the automotive industry. These factors are expected to stimulate an average annual growth of 10 to 15 percent in total market size in the next few years.
Since the mid-1990s, car customization, or “tuning” as it is known among enthusiasts, has become an increasingly popular trend in Spain. The “tuning” subsector is heavily influenced by trends from the United States. As such, Spanish distributors and consumers of “tuning” accessories are interested in products from the United States— especially exhaust pipes, self-adhesive appliqués and lighting and signaling equipment (including light-emitting diodes, or LEDs)—based on their reputation for quality and reliability. In 2008, a delegation of 160 Spanish firms attended the AAIW SEMA Show in Las Vegas. The SEMA Show, the largest aftermarket trade show in the U.S., is internationally renowned, especially in Spain, and offers the latest innovations in the automotive industry.
Currently, one third of Spain’s 24.6 million automobiles are more than 10 years old. With a large number of old automobiles in circulation, there is a growing need for properly-equipped auto shops that can meet the demand for repair and maintenance services.
Spanish government inspections and mechanical and safety standards are now strictly enforced alongside EU emissions control standards. In Spain, automobiles four to 10 years old are required to pass mandatory inspection every two years, while automobiles more than 10 years old must do so every year. Approximately 20 percent ofvehicles fail the first ITV inspection. These inspections will encourage more owners to take their automobiles to auto shops for pre-ITV checkups, increasing demand for high-quality pre-inspection equipment.
Traditional and independent auto shops face increasing competition from specialized service chains. Spain, mostly dominated by family-owned neighborhood auto shops, is experiencing impressive growth in specialized service chains. These franchises and auto centers offer rapid, efficient service to clients.
Speed, price and efficiency are the key for specialized service chains. All aim to offer the best possible service, in the least amount of time, at a reasonable price.
Another recent trend in Spain is the development of a professional subsector. By tradition, Spanish mechanics pass on their know-how from one generation to another, as opposed to formal training. In recent years the influx of highly-technical equipment in the market has increased efforts by trade industry associations and professional groups to provide mechanics with formal training. Specialized service chains, concerned with offering consistent, high-quality services to automobiles and their owners, also offer training courses to their mechanics.
Further enforcement of EU Directive 1475/95 has also brought about changes in the auto repair and maintenance equipment subsector. This directive permits auto repair shops and parts and accessories dealers to sell and/or install parts of equivalent quality to parts labeled with the name of the original automobile manufacturer. It also facilitates dissemination of technical instructions by automobile manufacturers to independent auto shops. The directive has already granted more legitimacy to generic parts and accessories, and is expected to considerably increase independent auto shops’ access to technical information for repair and maintenance processes. A main concern of local, independent auto shops is continued reluctance by local automobile manufacturer representatives to release technical information about “on-board systems”—an important component of all new vehicles being introduced into the market. Local industry representatives expect this situation to be resolved in the near future, bringing more openness to the auto repair and maintenance market and generating new competition between independent and official service facilities.
In an effort to further increase competition between car manufacturers and dealers, the EU has adopted new regulations to allow the sale of more than one brand of car in a showroom, with the manufacturer choosing only the zones in the showroom where their cars are displayed. These new regulations ended the monopoly of car manufacturers over the sale of their automobiles, and customers should receive improved service and cars at a lower cost.
The Prever Plan encourages owners of vehicles 10 years or older to exchange them for a government credit of approximately $600 towards the price of a new car, both to eliminate high emissions vehicles and to stimulate consumption. In 2007, Spain reported 1.6 million new passenger car registrations. Their complex electronic/electrical components are forcing auto shops to seek more modern and sophisticated equipment to meet consumer demand and avoid losing clients to competitors.
The progressive increase in diesel vehicle sales has contributed to the recent surge in demand for diesel maintenance equipment. Only 31.9 percent of passenger cars produced in 2000 were diesel. In 2008, almost 50 percent of all vehicles produced were diesel. It is expected that high gasoline prices relative to diesel prices will maintain or increase the demand for diesel engine maintenance in the future.
The rapid and steady growth of the automotive and aftermarket sector in Spain, combined with the solid reputation of U.S. automotive repair and maintenance equipment, should enable U.S. manufacturers to maintain and improve their position within the local market. Projections indicate that imports of automotive and aftermarket products from the United States will grow 10 percent over the next three years as highly technical/computerized equipment (mainly diagnostic and electronic equipment) becomes a standard feature of repair shops.
By Carlos Perezmínguezand Nerissa Berrios