When the EU tolled the death knell for the combustion engine late last year, prohibiting sales of new combustion engine cars starting in 2035, the opposition warned of creating a “Habana effect.”
Cuba is famous for the old, classic cars on its streets. Behind the charming postcard aesthetic is the harsh reality that the vast majority of Cubans simply can’t afford to buy new cars and so manage the only option available—keep the old ones running.
Spain is already a bit Havana-esque when it comes to cars. The top-selling car in Spain has the following profile: it’s fifteen years old and runs on diesel.
Why? The average Spaniard can only afford 10% of the new cars on the market. Ironically, the situation is due in part to public policies favouring electric vehicle technology to push diesel and other fossil-fuelled cars off the road.
Statistics from Spain’s traffic department analysed by El Debate showed that from July 2022 to July 2023, two out of every three car sales involved a used car. Four out of every ten used cars sold are more than 15 years old, and 54% of the used cars sold were diesel-fuelled.
At the same time, according to coches.com, an online portal for buying and selling new and used cars, the average price of new cars in Spain has increased 37% in the last decade while the median salary has only grown by 14% to sit currently at €18,286 a year.
“One of the main reasons for this price increase is the technological revolution that the sector is experiencing with electrification,” the study noted.
Hybrid and fully electric cars have increased their market share at the expense of diesel and gasoline-fuelled cars. Particularly affecting the market is the widespread integration of micro-hybrid technologies, which are various systems for reducing a car’s exhaust emissions, such as an engine that automatically turns off during short stops. This kind of technology is the easiest way for cars to get the ECO label now needed to enter the low emissions zones being widely established in European cities. According to the study, the increase in micro-hybrid technology has driven a wedge into the already opened breach between car costs and salaries.
“[Micro-hybrid cars] began to spread with the anti-pollution standard Euro 6d-TEMP, which entered into force in 2019, just as the gap between car prices and wages began to widen,” the coches.com study stated.
Other new technologies such as assisted driving and additional safety features contribute to driving up car prices as well.
An additional factor is car size. If the tiny Smart Car was the European middle-class driving icon of the early aughts, the pendulum has swung 180 degrees as car manufacturers promote the larger, all-wheel drive SUVs they sell with a larger profit margin. Europeans, coches.com notes, seem to have bought into the trend—if they can afford it.
“A car has an emotional component, for many people it is more than a tool that moves you from point A to B. Brands know this and play to offer more aspirational products, with models that evoke sportsmanship and adventure such as SUVs, which also give them more benefits per unit sold,” Nuño López-Coronado, deputy CEO of Coches.com points out, adding that only the smallest SUVs are financially within reach of the average Spaniard.
SUVs are gaining ground in the market at the expense of sedans and minivans. Sedans have all but “disappeared” from the list of affordable cars, “when in 2013 they represented almost 9% of the total accessible models.” Economic minivans, too, are at risk of disappearing from the market, coches.com warns.
Right now, Asian brands lead European ones in offering affordable cars.
Not surprisingly, with so much demand for older cars, the second-hand car market in Spain is hot, and even old cars command a relatively high price. According to El Debate, a Volkswagen Golf 2008 costs €4,000-11,000, a Seat Ibiza from the same year €3,000-8,000, and a Seat León €4,000-10,000.
Within the context of ever more stringent environmental regulations and higher car prices, car leasing, instead of owning, is also sharply increasing in Spain.
It is another sign that the European middle class is increasingly squeezed.
