The Tribune

By NEIL HARTNELL

Tribune Business Editor

BAHAMIAN new car dealers have "a little bit more bounce in our step" after industry sales for the 2012 first quarter increased 10 per cent year-over-year, although they want to see three consecutive quarters of growth before "counting on" a confirmed recovery trend.

Rick Lowe, operations manager and a director with Nassau Motor Company (NMC), the Honda and Chevrolet dealer, said new auto sales trends were "certainly headed in the right direction", with the 2012 first quarter top-line some 48.1 per cent up on 2010's comparative figures.

But 2012's sales increase is up against two very low base year comparisons, and Andrew Barr, sales manager at Friendly Ford, told Tribune Business: "The picture is not as glowing as you might think."

He pointed to the collective sales increase being enjoyed by Bahamas Motor Dealers Association (BMDA) members as being driven largely by just a few brands, specifically the Korean models, Kia and Hyundai.

They were benefiting from a very weak exchange rate between the Korean currency and the US dollar, while also exploiting their smaller engine sizes to attract the lower Excise tax rates. Both factors meant Korean new car brands were very attractive to price conscious Bahamian consumers.

This was confirmed by the BMDA, which told Tribune Business that Korean brands now accounted for more than 50 per cent of the Bahamian new car market.

Still, Mr Lowe said: "Things are certainly headed in the right direction. The key for all of us is to maintain that going forward, and how we go about it. It's positive news, and hopefully we will achieve that in the second, third and fourth quarters if the economy grows."

He acknowledged, though, that "it could be a very long time" before the BMDA saw collective industry sales return to pre-recession levels achieved in 2006-2007. Other key factors were whether consumers needed to save more for vehicle downpayments, and if banks and other lenders decided to maintain the slightly more aggressive lending stance they currently have.

"From where most of the people we've talked to stand, there's a little bit more bounce in everyone's step," Mr Lowe told Tribune Business of industry sentiment. "We're just hoping we can all stay at these levels or more.

"If we can get sales growing for three quarters in a row, we might be back on a trend we can count on..... We just have to keep doing the right thing from our perspective, having the right product and providing clients with what they're looking for. If we can do that, then hopefully good things will come."

While the macroeconomic environment was the key factor impacting BMDA members currently, Mr Lowe said that once the Bahamian economy and employment numbers picked up, "company performance" in terms of service standards would become the most important ingredient.

Mr Barr, though, was more sanguine about the industry's prospects. "I personally wouldn't have been so positive about it. The reality is that while I think we did a lot better in April this year than we did in April last year, and did better in April than in March, the majority of the growth came from Hyundai and Kia."

The Friendly Ford executive added that much of April's sales growth was likely attributable to the end-March Car Show, adding that at least half the 50 per cent sales increase seen over March came from that event.

"Is this a trend that will continue? I don't think so," Mr Barr added. "I think we're going to have overachievers. I just hesitate to give a glowing picture of something that's not as glowing as you might think.

"I do believe the results of the Car Show were positive for most dealers, and extremely positive for select dealers, and whether we continue that trend or select dealers will continue to have the advantage of the Korean products' price levels, that remains to be seen.

"They have the advantage over everyone else, and that's business. I have no complaints about that." However, Mr Barr was quick to point out that the likes of Kia and Hyundai were making "everyone else uncompetitive, as they do not have the price advantage of the Korean products.

"In all probability that trend will continue, where every month you find the majority of positive sales are Kia and Hyundai."

Mr Barr emphasised that while the Car Show often produced a sales spike, it was not something that could be used to forecast the economy's strength or industry trends.

He added that the Government's 2010-2011 Budget, which increased Excise tax rates on imported vehicles, and made the rate determinant engine size as opposed to its cost, had hit Friendly Ford - whose vehicles were all larger engines - harder than most.

"For us, we will probably not regain the volume we had before, as the duty had a lot of impact on our ability to be as successful as we were before," Mr Barr told Tribune Business. While Ford had developed smaller engine sizes and new technology, reducing Excise tax costs, the manufacturer's cost had also gone up.

And Mr Barr also noted that Friendly Ford's commercial vehicle sales had effectively been "halted" after the Excise tax regime changes placed them all in the 85 per cent tax bracket.

The BMDA said sales of passenger cars and SUVs continued to hold most of the Bahamian new car market, each with 42 per cent, while commercial vehicles remained "in a bit of a slump" at 16 per cent.

"The good news is that this year the results of the Car Show are better than the Car Show last year and the year before," Mr Barr added. "Banks are lending more freely, but the buying habits of the public have changed, and they're going to the least expensive vehicles, the Hyundai and the Kia."

The BMDA added of the Car Show: "Preliminary indications are that closed sales are far above the last two or three years."