Spain’s Auto Industry to Get $4.2 Billion in Government Stimulus

(Bloomberg) --

The Spanish government unveiled a 3.75 billion-euro ($4.2 billion) stimulus program on Monday for the country’s car industry, Europe’s second-biggest.

Almost 70 percent will be invested in the sector’s “value chain,” with other parts going to renewing existing car fleets and electrifying public transport, Prime Minister Pedro Sanchez said in a speech in Madrid. Funds also will go to replace existing cars older than 10 years for newer models and more energy-efficient vehicles.

Spain’s auto industry accounts for about 10% of gross domestic product, with car production comprising a fifth of the country’s exports and directly employing some 600,000 workers. Like tourism, it has been clobbered by the coronavirus pandemic, which led the government to impose one of the world’s strictest lockdowns. The economy could shrink as much as 15% in 2020, according to worse-case scenario estimates by the Bank of Spain.

The first installment of the stimulus, 1.535 billion euros, will be disbursed in 2020, Sanchez said.

Although Spain no longer has domestic carmakers, large foreign players including Volkswagen AG, PSA Group, Renault SA and Ford Motor Co. have plants in the country. CIE Automotive SA and Gestamp Automocion SA, both listed in Madrid, are among the largest Spanish car-part makers.

Spain is Europe’s second-biggest car producer, after Germany. But the local industry is suffering with Nissan Motor Co. having announced plans to close an an iconic plant it owns near Barcelona as part of a corporate restructuring.

©2020 Bloomberg L.P.