Meditation may be the word that best captures why people choose to buy a car, whether new or used. The semiconductor crisis interrupted vehicle production and created an indeterminate horizon for the market. Dealers—some of whom had long-standing poles of activity in Valencia and surrounding areas—have had to adapt to a rapidly shifting landscape.
What remains clear from recent years is that the market is alive, even as new passenger car sales show a net decline. As Raúl Morales, Communications Director of the dealers association Faconauto, explained in today’s context, 30 to 40 percent of 2019 production was sold by August. In the Community of Valencia, registrations totaled 47,159 passenger cars, well under half of the 94,623 recorded in the same pre-pandemic period. The core issue remains the lack of available vehicles.
“They don’t exist and we can’t deliver them. When customers ask for a car, they pull back and you offer a lead time of six months to a year. There is no guarantee it will be fulfilled”, said Manuel Palma, president of Automobiles Palma, which operates multiple dealerships in Valencia. Mid-term leases have at times led to unserviceability. Morales warns of greater uncertainty before year’s end and into a potential downturn, noting that demand is beginning to soften as well.
An industry in transformation
Against this backdrop, Faconauto’s leader notes a transformation at the core of the business, where profitability per vehicle is increasingly prioritized alongside sales volume. Manufacturers have raised vehicle prices, driven not only by rising raw material costs but also by the need to balance brand economics through evolving technologies as the electric vehicle transition accelerates. At the dealership level, Palma observes that profitability per vehicle has largely remained steady, even as the market shifts.
Changes extend beyond pricing. The way sales are generated is also evolving. Brands are leaning more on dealers as distributors within the agency model, where prices are predetermined and a commission is shared for each sale. This shift means dealers are less free to set the final price, and they must bid for vehicles. Palma argues that if commissions are reasonable, the model could be positive because it could reduce the financial burden of stocking and maintaining delivery facilities. If commissions run too low, the opposite effect risks materializing. Morales highlights a key concern: a dealer’s close contact with the customer could be diminished, with the customer increasingly aligned with the brand rather than the local dealer.
Threat to distribution templates
Another cloud hangs over the sector. Stellantis, a major automotive group including Fiat, Citroën, and Opel and representing about 25 percent of the Spanish market, has proposed reducing the number of dealers to one per province. According to Faconauto’s leader, this move, not yet applied to all groups, threatens a major disruption to distribution. It could lead to the loss of roughly one out of three outlets and as many as 35,000 jobs could be at risk, hanging by a thread.
Faced with this pressure, Morales calls for mutual agreement rather than unilateral actions by manufacturers. He emphasizes that any plant closures or forced layoffs should come with fair compensation for investments already made by dealers. The situation remains unresolved, with the sector seeking a stable framework for the dealer-brand relationship and urging constructive dialogue. Spain, Morales notes, is the only major market where such a framework is not yet established, underscoring the importance of a balanced approach to the evolving distribution model. The sector continues to navigate these changes while striving to maintain a reliable supply chain for customers in Valencia and beyond, as market dynamics and regulatory proposals reshape the landscape in real time (Source: Faconauto).