Published On:Wednesday, September 08, 2010

By NEIL HARTNELL

Tribune Business Editor

Bahamian auto dealers will have to wait a little longer before they can tell the Government: 'I told you so' over its Budget tax changes for the industry, one leading executive told Tribune Business yesterday, although the future outlook appears ominous given the 9.8 per cent decline in July 2010 new car sales.

Noting Customs Comptroller Glenn Gomez's assertion in yesterday's Tribune Business that he had noticed a decline in auto imports to the Bahamas during the early months of the 2010-2011 Budget year, something he attributed to the tax increases on the sector, Rick Lowe, Nassau Motor Company's (NMC) operations manager said their impact was too early to tell given the industry's long-term ordering cycle.

Many Bahamian dealers ordered their vehicle shipments five months out, Mr Lowe explained, telling Tribune Business that while orders already placed for months between July-November would probably be unaffected by the Budget tax increases, the real impact would be seen in following months.

Orders for this time period would have been placed post-Budget, when dealers were fully aware of the tax changes and how consumers had responded in terms of altered buying habits, directly impacting sales.

"He [the Comptroller] may see a bump next month, but after the September-October order cycle passes is when he may see a major drop," Mr Lowe said. "When the Budget was implemented in July, cars were already on order for September and October - they were already in the order book. It may impact future orders outside the confirmed order range."

Telling Tribune Business it was too early to determine the Budget's precise impact on the industry, Mr Lowe said that while revenues from auto imports may even rise in the short-term, they were likely to decline long-term until consumers adjusted to the higher end-user prices.

"We have to wait a little longer to say: 'I told you so'," he added.

"Sales have obviously slowed. We're looking at our numbers five months from now to see where we can cut back. That'll be when he [Mr Gomez] sees an impact from that.

"We'll see come November for sure where we might be headed, but I don't see anything turning around in a year. It will take Baha Mar a year to get anything going. It really does seem to be tightening, rather than getting any better."

New car sales in July by Bahamas Motor Dealers Association (BMDA) members fell by 9.2 per cent year-over-year, and Mr Lowe said other dealers had indicated to him that August was also a tough month.

Glenn Gomez, Customs Comptroller, had previously told Tribune Business that that "car imports had slowed down a bit" since the 2010-2011 Budget.

This altered the duty structure to one based on vehicle weight, and introduced three rates - 65 per cent for autos with an engine capacity of 2,000 cc or less; 75 per cent for autos with a capacity of 2,000-2,500 cc; and 85 per cent for all autos above 2,500 cc capacity.

Mr Gomez, though, said Customs had noticed car imports were beginning to pick up yet again, an indication that persons and dealers had adjusted to the Budget increases and were focusing on smaller cars.

The Comptroller suggested it was "almost a Catch 22 situation", where the Government's drive for smaller, more fuel efficient and environmentally-friendly cars, and to reduce the number of vehicles on the street, was almost conflicting with the auto industry's role as a key "revenue generator".

He suggested, though, that in the long-term this would "balance itself out".