The Tribune

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.”