Spanish Government Offers Fourth Cash-for-Clunkers Plan

Spain’s government offered the fourth cash-for-clunkers program in a year, extending state incentives for car sales to fortify an economy emerging from a two-year recession.

The Cabinet approved the 70 million-euro ($97 million) program, Deputy Prime Minister Soraya Saenz de Santamaria told reporters in Madrid today. The 1,000-euro subsidy, which must be matched by a discount from the dealership, is available for new cars priced at 25,000 euros or less. Buyers must trade in a seven- to 10-year-old vehicle in exchange for a more fuel-efficient model.

The previous three plans, all of which exhausted their funding, contributed to the purchase of 300,000 vehicles, Saenz de Santamaria said. The latest incentives will last six months or until the money runs out.

Car sales in Spain surged 29 percent in September, the steepest gain among Europe’s five biggest automotive markets, because of the earlier state-backed discounts. The delivery increase contributed to the region’s strongest monthly car sales growth in more than two years.

Auto manufacturers are counting on Spain, the only European country currently offering a cash-for-clunkers program, to help boost anemic demand across the region, where registrations are at a two-decade low and set to decline in 2013 for the sixth straight year. Spanish authorities are trying to support the car industry both to spur consumption and to sustain manufacturing in an economy ravaged by the collapse of a debt-fueled building boom.

Ford’s Production

Wage cuts resulting from the 2012 overhaul of labor rules have encouraged automakers such as Ford Motor Co. to increase production in Spain, where vehicle output rose 19 percent from a year earlier last month. Paris-based PSA Peugeot Citroen and Detroit-based General Motors Co. said on Oct. 1 that the U.S. company’s plant in Zaragoza, Spain, will build a new version of a jointly developed multipurpose vehicle in late 2016.

An increase in car manufacturing helped Spain’s economy emerge from a two-year recession in the third quarter. Exports are leading the recovery as the deepest government austerity measures on record hold back domestic demand and companies struggle to lure customers amid an unemployment rate of 26 percent.

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