Auto dealers forecast 40% drop for full year

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president is predicting that new car sales for the 2015 full year will be down by up to 40 per cent, following a particularly dismal October.

Fred Albury confirmed to Tribune Business that new auto sales were down more than 50 per cent year-over-year for October, the worst monthly performance for 2015 to-date.

While November and December’s first days had produced a slight improvement, Mr Albury said his full year forecast was influenced by the fact both months were up against tough year-before comparatives.

BMDA members benefited from a year-end rush in 2014, as consumers sought to purchase prior to Value-Added Tax’s (VAT) implementation - a one-off phenomenon not present this year.

Tribune Business understands that new auto sales for the first 10 months of 2015 are off by just over 32 per cent, a rate of decline that will accelerate if Mr Albury’s forecast comes true.

To arrest the drop, the BMDA president implored the Government to crack down on road side auto vendors who had suddenly appeared on public land offering vehicles for sale.

He also urged the authorities to tighten used car dealer regulation, suggesting there some Bahamians ‘fronting’ for foreign owners in the sector.

“It is bad out there,” Mr Albury told Tribune Business of the new car market. “The new car market is down around 35 per cent, and I think it’s going to go down further.

“In November and December last year, sales shot up because of VAT coming into play in January. We’re not going to have that this November and December. We’re sort of forecasting that the industry will be down 38-40 per cent compared to last year.

“The market has shifted considerably to the used car market,” Mr Albury added. “A boat came in the other day, and I think it had five to six Hyundais, 12-13 Kias, and 300 used vehicles.

“Over the last three months I’ve had few cars coming into my inventory. I’ve not seen many new cars on my end, as we’re trying to get inventory in line with what sales are. We’re not ordering out there.”

The Government has made several concessions to the auto industry in a bid to mitigate fears about VAT’s impact, including lowering import duties to a uniform 65 per cent rate.

It also switched the basis for import duty calculation from CIF (Cost, Insurance Freight) to just landed costs, and allowed dealers to defer VAT payments ‘at the border’ until the vehicle in question is sold.

While this minimised VAT’s price impact, and even lowered costs on some models, it has still failed to offset the new 7.5 per cent levy’s impact on consumer disposable income and spending power.

VAT’s impact further eroded fragile consumer confidence, already hard-hit by Baha Mar’s meltdown, a sluggish economy and high unemployment numbers.

And fewer potential new car buyers are able to qualify for debt financing, with the commercial banks employing ever-tighter lending criteria.

This has caught the BMDA and its members in their own version of ‘the perfect storm’, but Mr Albury suggested there were other ways in which the Government could aid legitimate dealers.

“You drive around the streets, go around the Montague Beach area and the roundabout outside West Ridge, and people are there selling two-three used cars they have brought in,” the BMDA chief told Tribune Business.

“The Government is not getting any Business Licence revenue out of that, nor VAT, except what they get at the port. They need to tighten up on the use of public properties to display vehicles for sale. It’s all over.”

Reiterating that such practices, combined with the sales slump at BMDA members, were increasingly depriving the Government of tax revenue, Mr Albury added: “There are a number of foreigners involved in the used car market as well, with Bahamians fronting for them, and that’s not making it any easier.”

The BMDA president, though, implied that his members would not ‘roll over and play dead’. He said his own Auto Mall business was “trying to find our niche in the market”, and develop new revenue streams from its parts and service departments.

“We’re focusing on the service side, taking on young guys and training them, and trying to increase service revenues,” Mr Albury confirmed. “We’ve just invested $50,000 in wheel alignment equipment for trucks and buses, and that ties in with a brand of tyres we import, which is doing really well.”

He added, though, that auto dealers would likely have to combine new income streams with “cost cutting measures”. Mr Albury said his Auto Mall business was looking at early retirements for some workers, and “shrinking inventory so we reduce interest on our overdraft”.

Acknowledging that a near-54 per cent October decline in new car sales was correct, he added: “November seemed to have picked up a bit, and December has started reasonably from our end.

“We’ll have to see how it continues through, as the first two weeks tend to be OK, and then it tapers off.”

Mr Albury, though, said he was holding to his previous forecast of no improvement in 2016, with the unfavourable macroeconomic environment set to be exacerbated through National Health Insurance (NHI) being “shoved down our throats”.

“I don’t see any change for 2015,” he told Tribune Business. “From where I sit right now, with what’s happening in the marketplace, with this Baha Mar situation, I don’t see any real, tangible improvement, especially in the 2016 first half. We’re preparing ourselves for that scenario.”

Comments

ThisIsOurs says...

The sales are down because the average Bahamian cannot afford a 20,000+ dollar car. It's that simple. They can afford ~maybe 5000. The game has changed.

Posted 7 December 2015, 3:21 p.m. Suggest removal

hurricane says...

You're a total fool if you spend $20k+ for a depreciating "asset".

Posted 7 December 2015, 3:37 p.m. Suggest removal

ThisIsOurs says...

That or you have the means to do so. Before the 2008 recession more people had the means to buy new cars, as these businesses probably can attest.

Posted 7 December 2015, 7:20 p.m. Suggest removal

Regardless says...

When the previous government raised the import tax on new cars, a former minister was advised that they were turning the country into a used car nation. His retort was there were more than enough persons of "means" who can afford new cars at inflated prices.

Now since VAT has been introduced and the economy took a sharp turn south, one wonders how many persons of "means" are left to purchase vehicles at ridiculous prices.

We have one a very sad selection of leaders with limited foresight for far too long!

Posted 7 December 2015, 4:18 p.m. Suggest removal

sheeprunner12 says...

The time is now to put a moratorium or freeze on vehicles in Nassau ............ some families have two or more per person ............... plus most are cheap on-line Hondas and Nissans that end up being used in crime

Posted 7 December 2015, 6:08 p.m. Suggest removal

DreamerX says...

Someone has all the cars they want!

Don't ban me from getting one because you don't want to be in traffic!

Posted 8 December 2015, 9:03 a.m. Suggest removal

jamesg30 says...

Nassau is different than out ilsands. Some Islands are 120 miles long. 85% duty on a vehicle in Nassau with all the public transportation that is available? Maybe. Out islands? Give us a break. Ever read the book Animal Farm? Right before our eyes.

Posted 7 December 2015, 7:57 p.m. Suggest removal

DreamerX says...

Then, where is the control on transport of cars into and out of Nassau? What you are proposing is a special economic zone for vehicles out of Nassau. Thus, unless people will agree to their car being PERMANENTLY listed as illegal to be used in Nassau, then, this is just an avenue for smuggling cars from cheaper import points.

Posted 8 December 2015, 9:05 a.m. Suggest removal

sheeprunner12 says...

We have these out of control traffic problems because there is NO planning .......... from government who is dependent on customs duty and not using a proper traffic registration system ........... to the average person who feels that his/her social status is measured by the value or amount of cars he/she owns ......... that was my point DreamerX .............. but then you are a dreamer (and dreamers do not run countries well)

Posted 8 December 2015, 12:39 p.m. Suggest removal

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