Market Monitor Automotive Spain 2017

 

• Production and car registrations increasing further
• Payments take 60 days on average
• Solid performance outlook

Automotive is a key sector of the Spanish economy. Spain is the second largest car manufacturer in Europe, after Germany, and ranks number nine globally. Automotive accounts for 20% of Spanish exports, with 85% of the national production sold abroad. Nine original equipment manufacturers (OEMs) are active in Spain, with a total of 17 production plants. Earmarked investments in new industrial plants in order to expand production of new conventional as well as electronic models amount to EUR 10 billion, with an average annual investment volume of about EUR 1.7 billion. The automotive suppliers subsector plays an important role for the sector´s performance, with more than 1,000 companies, 330,000 employees and generating turnover of more than EUR 32 billion in 2016.

The Spanish automotive sector has benefitted from robust global demand situation over the recent years. Domestic automotive production recorded a cumulative growth rate of 45% in the period 2012-2016. Last year production increased 5.6% year-on-year, to about 2.9 million units, according to the International Organization of Motor Vehicle Manufacturers OICA. The outlook for 2017 remains benign, with growth in line with the Spanish economy and output of more than three million units expected.

Domestic car sales have recorded annual increases since 2012, in line with the rebound after the economic crisis, helped by robust private consumption and a decreasing unemployment rate, increased access to bank financing for consumers and government schemes supporting the renewal of vehicle fleets and purchase of electric models.

The profit margins of Spanish automotive businesses have been good over the past 12 months, and are expected to remain stable in 2017. While external financing requirements and gearing are generally high in this sector, banks are willing to provide credit to the industry, for both short-term financing (working capital management) and long-term facilities (i.e. capital expenditure financing).

On average, payments in the Spanish automotive sector take around 60 days. Payment experience is good, and the level of protracted payments has not been overly high over the past couple of years. Non-payment notifications are low, and we do not expect major increases in the coming months due to the still positive outlook for automotive performance. The level of insolvencies in this sector is low, and this is expected to remain unchanged in 2017.

Our underwriting stance remains open due to the low claims ratio, good payment behaviour and the industry’s strengths: a solid industrial base and leading international position, productive and flexible manufacturing plants, a strong and innovative industrial supplier segment, the availability of highly qualified workers at competitive costs as well as significant public and private investment.