By Javi West Larrañaga

(Reuters) - New car sales in Spain surpassed the one million mark in 2024 for the first time since the COVID-19 pandemic, data showed on Thursday, but analysts and industry sources said this should not be seen as a sign of recovery in a sector facing a tough 2025.

Changing trends in car usage, high prices, uncertainty around electric vehicles (EVs) and fierce competition from Chinese brands are all expected to create challenges for the auto industry in Spain, said Felipe Munoz, an analyst at market research firm JATO Dynamics.

New car sales in 2019 reached well over 1.3 million, but then slumped to around 900,000 annually for the next four years. Though 2024's 1.02 million sales represent a 7.1% increase year-on-year, they are still far below the original trend.

Last year's rise was helped by a massive 28.8% spike in year-on-year sales in December, the data showed.

Munoz said the uptick seemed transitory, as new car sales had failed to properly take off after the pandemic clobbered demand, adding: "I don't think (the Spanish car market) will ever hit those numbers again."

According to Munoz, after the semiconductor scarcity crisis, European car manufacturers focused on increasing their prices at the cost of selling fewer units - and still made record profits.

"That strategy worked perfectly for them until this year, when Chinese brands started to penetrate the market more successfully in Europe, and they realised their prices were too high in comparison," he added.

Spanish car part manufacturer Gestamp was less affected by a drop in car sales in Spain and Europe due to its geographic diversification, CFO Ignacio Mosquera said, but more had to be done to help an ailing sector that lacked a clear policy in "one of the most important industry overhauls in history".

"If there's no public-private partnership, there's uncertainty in demand and people don't know which vehicle to buy. Faced with that decision, what do they do? They extend the life of their vehicle," Mosquera said - thus reducing sales.

Echoing that sentiment, the head of Spanish car part manufacturers' association Sernauto, Jose Portilla, said more state support was needed to encourage the sale of EVs.

"If we're able to boost the recharging infrastructure, EVs become more affordable, and the subsidies are given at the time of purchase instead of one-and-a-half or two years later. This will encourage the market much more and we'll be able to redirect this situation," Portilla added.

(Reporting by Javi West Larrañaga; Editing by David Latona and Gareth Jones)