Spain to provide up to €4,000 in subsidies for purchase of a new car

The scheme, which is part of a €3.75 billion plan to aid the automotive industry, is aimed at mitigating the impact of the coronavirus crisis and boosting the sale of low-emission vehicles

Spain's PM Pedro Sánchez presenting the plan to support the auto industry.
Spain's PM Pedro Sánchez presenting the plan to support the auto industry.La Moncloa

The Spanish government will provide incentives to purchase new, low-emission vehicles as part of its efforts to stimulate the economy, which has been hit hard by the coronavirus pandemic.

Prime Minister Pedro Sánchez on Monday unveiled a €3.75 billion plan with 21 measures aimed at helping the automotive industry. Part of the amount will be direct aid, while close to €2.7 billion will be provided through soft loans for the sector through the state-owned bank Instituto de Crédito Español (ICO).

Sánchez, of the Socialist Party (PSOE), said the goal is to “mitigate the enormous consequences of Covid-19 in 2020 while we look to the future.”

The direct aid aims to get the more-polluting vehicles off the roads while boosting motor vehicle registration. Buyers will receive between €400 and €4,000 from the government for purchasing a new car that meets certain requirements, and this subsidy must be matched by manufacturers and dealerships.

The direct aid aims to get the more polluting vehicles off the roads while boosting motor vehicle registration

The amount of the aid will depend on the vehicle’s emissions: the more polluting ones will receive the lowest subsidies, while zero-emission cars will attract the maximum amount. In order to be eligible for the subsidies, it will also be necessary to first scrap a car that is more than 10 years old. Scrapped vehicles more than 20 years old will qualify for more funds for their owners.

The initiative was drafted by several ministries and includes two sets of subsidies. One involves electric cars and the infrastructure required to charge them; this part of the scheme will receive €100 million in public funding.

The second set of subsidies is more controversial, as it provides incentives for the purchase of all kinds of vehicles, including those that run on gasoline and diesel. The automotive sector had been demanding to include them in the aid program, and the government will contribute €250 million to this plan, of which €20 million is earmarked for trucks, according to the document.

According to the government, the vehicles on Spain’s roads are 13 years old on average, and the older gasoline and diesel models are more polluting than the newer versions coming out on the market now.

“We were asking for an orderly and fair plan, and this one has both ingredients”
Gerardo Pérez, Faconauto

Another requirement is that the new vehicle must be among the 45% more fuel-efficient ones on the market. Subsidies will not apply to vehicles emitting more than 120g/km of carbon dioxide, which leaves out most sport utility vehicles (SUVs). And the total purchase price of the vehicle cannot be in excess of €35,000, or €45,000 for cars adapted to the needs of people with disabilities or for zero-emission cars.

The Spanish executive, made up of a coalition of the PSOE and the leftist Unidas Podemos, has also allocated funds to upgrade the fleet owned by state agencies and other public bodies and to replace the older cars with electric vehicles whenever possible. Local governments may also use any budget surplus toward the same goal.

Meanwhile, the automotive industry has pledged to make between 700,000 and 800,000 electric vehicles in Spain, which would represent 12% of the European market share. Next year there will be around 15 models produced at the 12 existing assembly plants in Spain.

Industry leaders have expressed satisfaction with the scheme. “We were asking for an orderly and fair plan, and this one has both ingredients,” said Gerardo Pérez, president of Faconauto, the car dealership industry association. “It protects jobs and the environment.”

José Vicente de los Mozos, president of Anfac, the car manufacturer industry association, said the plan “puts people at the center.” The labor unions CC OO and UGT backed the plan and asked for support for the 3,000 workers at the Nissan plant in Barcelona that is due to shut down in December.

Isabell Büschel, Spain director of the European federation Transport & Environment, said the plan goes “in the right direction” but lamented the fact that the scheme includes incentives for the purchase of gasoline and diesel vehicles.

The green group Ecologists in Action expressed similar views and said that public funds for transportation and mobility should be invested “in infrastructure and measures prioritizing trips on foot and bicycle, and in aid for public transportation.”

English version by Susana Urra.

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