Car Sales in Spain fall

Spanish car sales rose 18.1 percent in January compared with the same month of last year, but will fall in the second half of 2010 as government subsidies fade away, car makers' association ANFAC said Monday.

The sales increase followed a rise of 25.1 percent in December and 37.3 percent in November. Car sales fell 17.9 percent in 2009 to 952,772 vehicles.

In May, the government began offering 2,000 euro ($2,860) subsidies to new car buyers, in addition to a 700 million euro subsidy to replace old cars with energy-efficient models.

"The continuation of government subsidies is having a positive influence on car sales," said ANFAC in a note accompanying the data.

Yet the association warned of worse to come as a planned VAT hike takes effect in July and that sales in 2010 would be roughly in line with those in 2009.

"In the second half of the year sales will be negative, with falls over 18 percent as a result of the 2 percentage point rise in VAT and an end to government subsidies."

The data showed also showed that sales of the most energy efficient cars rose by 53.8 percent in the month.