Spain's recent value-added tax increase is having a dramatic impact on the country's already flagging auto sales, industry association Ganvam said on Monday. Spain increased its VAT to 21 percent on September 1.
According to Ganvam, new car sales in Spain sank 27.6 percent to just 12,300 units during the first two weeks of September. Ganvam says the new VAT added about 650 euros ($850) to the average vehicle price in Spain, driving many shoppers from the market.
"These figures confirm our fears that the crisis in the sector is becoming more severe," Ganvam President Juan Antonio Sanchez told Reuters.
"If you increase taxes in a market paralyzed by lack of financing, declining consumption and uncertainty about the future, it's inevitable that demand will fall even further."
Some car makers in the country are actually absorbing the higher VAT, but Ganvam says the tax hike is still keeping some buyers from showrooms.
New car sales in Spain, one of the country's hardest hit by Europe's debt crisis, have been falling for the better part of two years, although August managed a modest 3.4 percent expansion. However, Ganvam says the spike was simply the result of shoppers pulling ahead big ticket purchases before the country's September 1 tax increase.