• Supply chain woes slash inventories up to 70%

• BMDA chief’s group $4m below normal stocks

• ‘Perfect storm’ to hit flat Q1 sales momentum

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Auto dealers were yesterday “scraping the bottom of the barrel” after supply chain woes slashed vehicle inventories by up to 70 percent and left them unable to meet higher-than-expected demand.

Ben Albury, Bahamas Bus & Truck’s general manager, told Tribune Business the sector and its clients have to “grit our teeth and bear it” after substantial increases in production/delivery lead times by manufacturers left his most popular models at just five percent of their normal inventory.

He was backed by his namesake Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, who predicted that some dealers may “run out” of certain new vehicle models this summer before the global industry solves its supply backlog.

Revealing that combined vehicle inventory at his Auto Mall group of companies is down by $4m compared to normal levels, he explained that many dealers had cut their orders due to COVID-19 related uncertainty only for consumer demand to be more robust than expected.

Predicting “a rough year” until these issues outside the capacity of Bahamian dealers to control are resolved, Fred Albury conceded that it would to tough to maintain new vehicle sales momentum that resulted in the 2021 first quarter essentially being flat against the prior year.

BMDA members collectively sold 339 vehicles during the three months to end-March, a drop of just seven compared to the prior year period’s 346. The 2020 first quarter only felt COVID-19’s impact during the final three weeks, thus making it a reasonably decent comparative against which to gauge the sector’s post-pandemic recovery.

And, while the new auto industry sold 92 vehicles in April 2021, the year-over-year comparison with last year’s 12 is relatively meaningless given that the entire Bahamas was locked down for that month as part of COVID-19 related health measures.

A more meaningful comparison is the 131 vehicles that the sector sold in April 2019, a figure some 42.4 percent higher than this year’s return, and which suggests the Bahamian new auto industry still has some way to go - like the rest of the economy - to fully recover from the pandemic.

Fearing that the inventory shortages may undermine healthier-than-forecast demand, Ben Albury told this newspaper: “Right now I have adequate demand. My biggest issue is securing product. There are tons of issues that are manufacturers are having.

He explained there was a major shortage of key semi-conductor components for new vehicles, due both to a factory fire that had reduced production capacity as well as competing demand for their use in laptops and computers after COVID-19 drove an increase in persons working and learning at home.

The Bahamas Bus and Truck chief also cited shipping, cargo and production issues, noting that a vehicle shipment he was expecting last month was still to arrive because the vessel’s sailing was suspended after several crew members caught COVID-19.

“All the larger manufacturers are way behind in production, so it’s causing us delays in securing product,” Ben Albury said. Whereas it previously took new Japanese vehicles between two to three months to arrive in The Bahamas from the day they were ordered, it is now taking six months, while American-made vehicles that used to take four months are now taking six to seven months.

“The demand is there but the product is not until they catch up,” he added of the manufacturers. “That has us limited right now in having the chosen inventory to offer to people. That’s just not there. In two to three months they may catch up....

“Right now we have got to grit our teeth and bear it. It’s having a terrible impact. I’m scraping the bottom of the barrel. I have a strong commercial inventory right now, but as far as high-end SUVs, which tend to trend better because of high demand, we’re at 5 percent of what we are normally.

“We had pre-sold a lot of inventory to people paying in advance for vehicles. It’s just trying to deliver them in a timely fashion. Overall I’m probably 60-70 percent down [on inventory levels].  I have a slew of inventory orders. You lay out a lot of money to secure the product, and have a long lead time before I get it to sell and make a product.”

Besides resulting in cash flow issues for dealers by tying up significant sums in products they have yet to deliver, Ben Albury said they are also unable to advise clients on when their vehicles will likely arrive in The Bahamas.

“It’s just a total meltdown of the system,” he advised. “It’s not a place I expected to be in at this particular point in time; I felt we would have too much inventory and not enough demand. For some reason money is still moving around. Look at high-end goods, high-end real estate and home construction. All those things are moving.”

Pointing out that supply chain bottlenecks are presently not unique to the auto industry, with building materials another industry experiencing similar, Ben Albury said: “I think it will not level off until August.”

Fred Albury, meanwhile, acknowledged that supply delays meant “it’s going to be difficult” to maintain the 2021 first quarter sales momentum through the second and third quarter of this year. And the COVID-19 pandemic is further disrupting manufacturers.

The BMDA president said India, arguably the country hardest-hit by the pandemic at present, had become an important vehicle manufacturing supply centre for the likes of Kia, Suzuki and Hyundai. However, he had just received a letter from Suzuki today informing him that manufacturing in India has been suspended because oxygen supplies have been commandeered for medical purposes.

“I’ve got a gut feeling that this summer some dealers are going to be running out,” Fred Albury said, “and it’s going to take the supply chain a while to get back up. It’s going to be a rough year. It’s been a perfect storm of disaster with what’s been happening.”

He explained that his Auto Mall group had been acquiring “some slightly pre-used” 2021 models from the US to bolster inventory, but the lack of new autos meant that auction prices were now being pushed “sky high” - and, in some instances, were now higher than when they were first sold.

“We’d slashed inventories by quite a few million dollars since last, and were very cautious on orders because we didn’t know what was happening with this pandemic,” Fred Albury told Tribune Business. “Now we have this shortage and problem in production capacity that has slowed things.

“My inventory, between my group of companies, is down by $4m or so, and I’m not having much come over in the summer months. I’m hoping we will have inventory lined up by the fourth quarter. The hurtful part is we have ongoing expenses to deal with and have no cash flow coming in. That’s the hurtful part.”