Park for hire cars in Palma, Mallorca

Eighty-five per cent of car-hire business is tourism-based.

13-10-2020Jaume Morey

The Feneval national federation for vehicle-hire businesses is pointing to an 80% drop in turnover this year. The main reason for this decline, and an obvious one, is the dramatic fall in tourist numbers. An indication of this fall comes from tourist statistics up to and including August. Nationwide, there were 15.7 million foreign tourists. Over the same period of 2019 there were 58.2 million.

The president of Feneval, Juan Luis Barahona, explains that 85% of the sector's activity is linked to tourism, and he highlights the especially significant decline in foreign tourist numbers between June and August - 5.1 million against 28.8 million last year. This situation worsened when the UK introduced the quarantine requirement towards the end of July, as the UK market - in a normal year - is the largest foreign tourism market and represents 21% of all foreign tourist arrivals.

Barahona says that there was a slight increase in demand from national tourists but that this "didn't at all compensate for the sharp drop in income" because of the loss of foreign tourists. Areas of the country with the strongest links to tourism were hit the hardest - Malaga, Valencia and the Balearics, with the Canaries having been most badly affected.

The Anfac national association of car manufacturers indicates that there was a 76% fall in vehicle registrations in June. In July this was only 14.5%, while in August there was a 21.5% increase, but the overall effect on fleet renewal orders is reflected in what the Hertz Spain CEO, Javier Díaz-Laviada, has to say: "The entire fleet scheduled to have been incorporated before the summer was cancelled." There had to be an adjustment of all costs because of the mobility restrictions. Activity was at a minimum or non-existent at times. The accumulated decrease in registrations for the whole sector up to September is put at 61.2%.

The Feneval president welcomes the extension of ERTE until January but argues that it will need to be extended until the 2021 summer season if the current situation continues. He adds that there is special vulnerability for 92% of car-hire companies, as these are small businesses with fewer than ten employees.

A measure that the sector is pressing for is a reduction in IVA (VAT). This is a reduction that was being called for before the pandemic, Barahona observing that "it is not understandable how a sector whose activity is linked almost entirely to tourism and passenger transport pays 21% IVA". He argues that it should be the 10% tourist and passenger transport rate.

Taking an optimistic view, Barahona says that once the pandemic is over, the sector will not only return to normality, it will have "a greater role" through customer demand for new mobility.

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