European trend? Used sales surge as OEMs axe minicars
It’s a textbook example of the law of unintended consequences. Because of CO2 rules, OEMs are axing smaller models. This is driving price-conscious buyers to the second-hand market. That’s bad for OEMs – and for the environment. It’s now happening in Spain, and soon possibly across Europe.
Here’s how this story goes. In order to align themselves with the EU’s emissions regulations, manufacturers have the option to equip their existing car model range with emissions-reduction technology.
That’s expensive, and it virtually wipes out the profit margin on minicars like the Fiat Punto, Opel Karl (pictured, at the 2015 Geneva Motor Show) or Ford Ka+. In these and other cases, the OEMs have chosen to discontinue the production of these models.
That’s a problem for budget-conscious car buyers, who form a significant part of the market. With their preferred choice removed, they have to make another one. But instead of moving up a segment, they are crossing over into the used-car market.
That’s what’s happening in Spain, at least. In 2019, the sale of new cars dropped 4.8% in Spain – by 12% even, if we just look at the private market. In contrast, the sale of cars over 20 years old shot up by 17%.
The downward trend of new-car sales only became more pronounced this January, with total registrations down 7.6%, and down 14% for the private market.
ANFAC, Spain’s automotive industry association, said the fact that “families prefer to buy an old car rather than a new one” presents a worrying trend.
Why is this happening? To be sure, there are other factors in play, some European, some particularly Spanish.
- As elsewhere in Europe, private sales have been affected by the rise of private lease, meaning that private customers no longer buy a vehicle themselves, but get it via a leasing company.
- Spain’s particular mix of political uncertainty and the decline of purchasing power is also a factor.
- With the country’s tax on used-car sales fixed at a low 8%, the incentive to buy new is relatively low in Spain.
But whatever the local factors, the Spanish run on used cars could be the beginning of an EU-wide trend, for two main reasons.
- The same measures to tackle climate change are affecting OEM policies across the entire EU. Similarly budget-conscious car buyers will come to similar conclusions in other member states as well – perhaps a bit later, as Spain’s economic crisis has revealed the trend earlier than elsewhere.
- The intention of several European countries to ban the sale of new internal-combustion vehicles in the near future (by 2030, in many cases) is motivating consumers to hold on to their vehicles longer and may prompt a boom in used-car sales when it comes into effect.