Thursday, February 25, 2016
By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
A leading auto dealer yesterday revealed that his Business Licence fee payments have declined by around 40 per cent year-over-year, and said: “Making money is a thing of the past.”
Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, cited the tax payment for his Auto Mall business to illustrate just how much the new car industry is suffering in a still-struggling economy.
He told Tribune Business that the sector had suffered an “extraordinarily slow” start to 2016, with one dealer able to sell just four vehicles in January.
Acknowledging that the initial months of every year were traditionally slow, Mr Albury said 2016 had been unusually depressed, with February having shown little improvement on January’s numbers.
With disposable incomes and spending down post-VAT implementation, and little positive news to foster economic confidence, the BMDA chief added: “The consumers have gone into hiding.”
Given that it is based upon top-line revenues, Mr Albury said the Auto Mall’s Business Licence fee for 2015 gave a good indication of how much new car sales had plummeted following Value-Added Tax’s (VAT) introduction on New Year’s Day 2015.
“I did some calculations on our Business Licence. For 2014, it was $500,000, and this year it’s $300,000,” the BMDA chief told Tribune Business. “That tells you how much it’s down.”
Using those numbers, and assuming a 1.25 per cent Business Licence fee rate, Tribune Business’s ‘back of the envelope’ calculations suggest Mr Albury’s company has seen revenues fall from $40 million to $24 million year-over-year - a $16 million drop.
Mr Albury was backed by Rick Lowe, Nassau Motor Company’s (NMC) director/operations manager, who said: “Generally, there’s a climate of uncertainty, and you can’t keep on taxing people more than they’re earning.
“It’s quite depressing. I don’t know if people are holding off for the Car Show, but it hasn’t really helped us in recent years.”
Confirming that early indications suggested things would not get much better in 2016, Mr Albury said: “The beginning of the year usually does start slow; January in particular is a very slow month.
“This time round, it was extremely slow, and February has not been much better out there. I know one dealer, in particular, was extremely, extremely slow; their sales were about four units for the month of January.”
Asked to explain the seeming further decline in the new auto market, Mr Albury replied: “It’s just the times we live in.
“Consumers have shifted considerably to use cars, and once they’ve shifted, and with the economy where it’s at, that’s what it’s going to be for some time.
“It’s just a mixed pot of stuff that’s happening out there,” the BMDA chief added. “Consumers are being very cautious on their spending, and there’s not a lot of positive news in the marketplace, with Baha Mar being further delayed.
“The consumers have gone into hiding; that’s the only way I can put it.”
Mr Albury said sales at Quality Auto, the Hyundai dealer that is part of the Auto Mall, were also down year-over-year for 2016 to-date.
“We’re working on just trying to keep our doors open; making money is a thing of the past,” he told Tribune Business. “Paying your bills and trying to survive without laying-off any staff members [is the goal] now. It’s rough and tough out there.”
Mr Albury’s remarks will again cause concern about the level of activity in the Bahamian economy, especially since as new autos - a so-called ‘luxury good’ - are typically one of the key indicators used to determine its strength.
His comments also show how declining economic activity impacts the Government’s revenue streams, such as Business Licence fees, which are dependent on top-line sales.
Mr Albury, meanwhile, said even used car dealers were being hit by persons “circumventing” the formal economy and tax system by selling vehicles imported via the Internet at the roadside.
“What’s happened is that used cars have flooded the market to the point where guys in the used car business are being affected,” he told Tribune Business.
“You have guys buying two-three cars off the Internet and selling them at places like Montague Beach Park, and especially the roundabout by the West Ridge Shopping Complex on West Bay Street.
“There’s usually eight to 10 cars there. When these guys sell them, they don’t collect VAT, and are probably not paying Business Licence fees and NIB contributions, and are using Government properties to display product on,” Mr Albury added.
“There needs to be some control on these guys bringing in one-two vehicles. They need to pay Business Licences, and comply with VAT and the Tax Office, and get a shop licence.”
The BMDA president conceded that the upcoming Car Show at the Mall at Marathon was unlikely to do much to boost new auto sales in 2016.
“We’ve even had some dealers complain that, for the past couple of years, it’s not been worth it. There are a lot of lookers, but no buyers,” Mr Albury said.
He added that the Car Show was now more a promotional tool for dealers to showcase particular models, and keep themselves and their brands in the public eye.
This year’s event is also set to be “scaled back” due to the ongoing renovations at the Mall, whose entrance will only allow vehicles with a seven foot length or less to be brought inside. Larger autos will have to be displayed outside.
“There’s not much positive out there,” Mr Albury reiterated. “We just hope to God it doesn’t go any lower than it was last year. If it does. I wouldn’t be surprised to see some people closing up or consolidating operations.”
The Government has sought to minimise VAT’s impact on the auto industry by changing the Excise Tax calculation basis to landed cost, and by deferring the 7.5 per cent border levy until the time of sale.
Excise Tax rates were also lowered to a uniform 65 per cent, but this has done little to aid consumers with reduced disposable income/spending power as a result of the decision to implement VAT.
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’.
Comments
SP says...
Don't just blame the PLP! The FNM are equally as guilty for where we are!
Posted 25 February 2016, 4:50 p.m. Suggest removal
themessenger says...
Not only in your business Mr. Albury. Anyone in retail in this country who's breaking even is way ahead of the game.
Posted 25 February 2016, 3:57 p.m. Suggest removal
Honestman says...
2016 is going to be a dreadful year for the Bahamian economy thanks to the greed and ineptitude of the PLP government. The country would have been doing well had this cabinet shown even a degree of competence and integrity. What we have now is an incomplete "White Elephant" of a resort on Cable Beach, a working class that is being over-taxed to pay for the excesses and incompetence of government, and an economy that is on its knees. That is the legacy of Perry Gladstone Christie and the PLP.
Posted 25 February 2016, 4:08 p.m. Suggest removal
John says...
With the exception of food, every other major retail business in this country is reporting that their sales are down 25 - 50 % since January. Just look at the gas stations. Gasoline is down to $3.50 and the attendants are sitting on the pumps most of the time sleeping. Go to places like BTC and BEC and the lines are short to none and even the banks are not crowded. Yes the Internet has put a serious dent in retail shopping, from clothing to electronics to automobiles. But the main problems are the cost of living is too high. Persons working full time are barely managing to buy food and pay their mortgage and utilities. Nothing is left. Then too many people have been unemployed and for too long: two, three, four years and even longer. The two thousand workers at Bah Mar are just a small part of the puzzle. A quart of mayonnaise cost almost $6.00, a loaf of bread is $5.00 and a gallon on milk is $9.00. How can the average working Joe or Jean ever afford a new car?
Posted 25 February 2016, 4:12 p.m. Suggest removal
SP says...
**HA,** still some lucky people out there! Try operating at 60 - 80 % since last August including the Xmas rush which never happened!
Houdini himself couldn't survive in this soft economic climate!
Posted 25 February 2016, 5:14 p.m. Suggest removal
observer2 says...
We have 2 cars, we are going to sell one and make do with one.
Cost of living is too highly.
I suggest all consumers look carefully at thier recurring expenses like cable, Internet, BTC etc and cut back wherever you can.
Even worser times are coming.
Posted 25 February 2016, 4:34 p.m. Suggest removal
SP says...
**..... NEWSFLASH.....Immigrant workers do not buy new cars or much of anything else ....**
Successive governments proved the depth of their incompetence and ignorance of our economy by being totally blind to the fact that Haitians, Asian and Latino expat blue collar work permit holders do not spend in the local economy beyond the very bare essentials.
These work permit holders do not spend on new cars, cloths, fast food, dry cleaning, motel room rentals, restaurants, bars, nightlife and other non essential extracurricular activities.
Expat blue collar workers are here strictly to earn U.S. dollars to repatriate remittances for building homes, purchasing real estate, building savings and supporting families in countries of origin.
Alternatively, Bahamian blue collar workers are well known to getting paid on Friday, flat broke by the following Tuesday, drive flashy cars more impressive than their housing, dress to impress, spend and party like there's no tomorrow etc, and maintain less than $1,000.00 in bank savings speaks HUGE VOLUMES to the amount of money Bahamians pumped back into circulation of the local economy.
This phenomenon of the present economic downturn across retail sectors has no end in site, as more and more expats legal and illegal join the local work force and Bahamians continue losing jobs moves upward towards the socio-economic class.
Summarily....The Bahamian economy is quickly dyeing due to foreign internal forces lack of reason or interest in participation in the local economy.
The FNM sold $40M in work permits to 26,668 foreign blue collar workers at $1,500.00 followed by this PLP that sold $73M in work permits to 40,000+ foreign blue collar workers at $1,500.00 who do not spend locally, now causing the local economy to come to a standstill.
We are well on the way heading for ***self inflicted*** total economic collapse.
Just **HOW FU%KI$G DUMB** does one need to be not to have seen this coming?
http://tribune242.com/users/photos/2015…
Posted 25 February 2016, 4:48 p.m. Suggest removal
Chucky says...
Who you think you're kidding SP, all the people on work permit are working for Bahamians. Tell me of one organization here of any size or capacity that doesn't employ foreigners?
The expats are here because we don't have qualified or dedicated enough people to organize and get things done.
We first need to show we can do these jobs and do them just as well, and only then will there be an incentive to eliminate expats. Unfortunately , for this to happen, we need to have real education for our people, and improve on our own integrity and work ethic.
No employer would ever hire a foreign if we had an equivalent sitting here and available.
Posted 26 February 2016, 11:48 a.m. Suggest removal
Economist says...
We have reduced our Cable speed and TV package, also given up our BTC land line. Saving about $75 per month.
Also driving more carefully and coasting where possible, worth an extra mile per gallon.
We figure that we are someway towards compensating for the extra cost of VAT imposed by government last year.
Stands to reason that businesses must be hurting.
Posted 25 February 2016, 4:50 p.m. Suggest removal
John says...
Do you know when BTC disconnects your phone for non-payment they first charge you a $5 late fee. Then even while your phone is disconnected you will be charged rental. If you have a post paid phone you will still be paying the monthly cost of that package even though you cannot text, make calls or use the Internet. Then if you are so fortunate (or unfortunate) to find the funds to reconnect they charge you a $15 reconnection fee. Now ask the phone card vendor how much he makes on a $5.00 card. Still just 25 cents. Will he ever be able to afford a new car?
Posted 25 February 2016, 5:05 p.m. Suggest removal
ghostwriter242 says...
Cars in Nassau are too expensive! Case in point. Decided to purchase a 2015 Toyota Camry Hybrid last year after driving the same car for 16 years. Went to the local Toyota dealership and they wanted $54,000 for a stripped down version. Able to land a 2015 Toyota Camry Hybrid fully loaded for under $35,000.
Hey I'm all for shopping at home, but not when I can save $20,000.
Posted 25 February 2016, 6:02 p.m. Suggest removal
John says...
Do you know that in the US only one in every 20 cars on the highway if fully paid for? One in every 10 is a lease vehicle and the rest are financed. In the US car manufacturers not only sell cars but through their dealerships they finance and lease them. So they build customer loyalty and brand loyalty. Their main goal is to keep cars coming off the assembly line and off the car lots. The government of the Bahamas is not concerned with how many cars are sold by local dealerships because when the big ship comes from Japan there and crowds of Bahamians waiting for vehicles they purchased on line. So the government's revenue has not decreased as far as collecting duty/Vat on auto mobiles and since licencing is based on size of the vehicle and not value that has probably increased because of the number of vehicles coming from Japan. Also the number of non-dealership car lots has dramatically increased and even though there is a vast difference between their prices and what one can land a car for in Nassau, there is a market of people who do not want to wit three months for a car so they are willing to pay the difference in price. The local dealerships must now re-invent themselves and offer products and services that persons cannot get fromJapan.
Posted 26 February 2016, 12:54 p.m. Suggest removal
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