Volvo Holding Its Own in Battered Spanish Market

MADRID – Volvo dealers in Spain look to recover from an average 1% decline in profits in 2012, the first negative result in 10 years.

German Lopez, chairman of Volvo Car Spain, says the red ink resulted from the overall contraction of the country’s automobile market and the delayed arrival of the new V40 5-door hatchback. He believes the auto maker’s dealer network will return to profitability in 2013.

The 1% slip was larger than the 0.6% drop among all dealers cited in a recent survey by Snap-On Business Solutions conducted for GANVAM, the Spanish association of auto dealers, repairers and vendors.

Speaking at the opening of a new Volvo franchise outside Madrid, Lopez notes that until last year dealers managed to eke out profits during the economic slump that began in 2008. Their margin that year was 0.5%, followed by 1% in 2009 and 0.9% in both 2010 and 2011.

Despite the overall average decline, 55% of Spain’s Volvo dealers finished 2012 in the black and many of the rest were close to breaking even.

“The problem was that about a dozen of our dealers suffered important losses and, as a consequence, they are now negotiating an agreement to leave the business. All of them will be replaced,” says Lopez.

Profitability also was curtailed by slow sales of the S30, at the end of its lifecycle, and the delay in shipments of its replacement, the new V40.

Lopez forecasts a weak overall car market in Spain in 2013, with only 660,000 deliveries. He says sales should be helped by the revival of a government plan to scrap older, more-polluting vehicles by subsidizing purchases of newer, more-efficient models.

“Despite all those problems, we are confident that the Spanish dealer network will come back to profitability at the end of 2013,” Lopez says. Volvo Spain’s sales target for the year is 7,000 units.