The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Value-Added Tax (VAT) fears drove a 176 per cent year-over-year spike in December 2014 new car sales, a Bahamas Motor Dealers Association (BMDA) representative said yesterday, as the new tax casts “a pall” over the industry and wider economy.

Rick Lowe, Nassau Motor Company’s (NMC) director/operations manager, told Tribune Business that while the impact of December’s buying surge remained to be seen, early 2015 figures showed that consumers were “gun shy” as a result of VAT.

December 2014’s sales were ‘more than double’ the prior year’s, indicating the impact VAT-related uncertainty had on many consumers as the January 1 implementation date approached.

While some may view the 176 per cent increase in new car sales as a major boost for BMDA members, they effectively represent ‘forward buying’ by consumers, many of whom would likely otherwise have purchased in the 2015 New Year.

December is thus likely to be a ‘one-off’, and this - and its impact on the auto industry’s wider performance - can be seen that the year-over-year sales increase for the 2014 fourth quarter was much lower - just 53 per cent.

“People were trying to buy before the push,” Mr Lowe told Tribune Business of the sales spike. “What impact that will have on us for this quarter (the first three months of 2015), who knows?

“The numbers aren’t released yet, but lots of people are saying it’s been pretty lousy. It’s [VAT] like a pall over the country.”

He added: “Based on what we’re seeing and hearing, it’s quite slow. Everybody is saying that the new car business is slow.

“Floor traffic is up over January and February, but it’s nothing to write home about. People are gun shy over the VAT.”

The Government this week said its large VAT registrants, those companies with annual turnovers of $5 million or more, had submitted $17 million in taxes to-date via their January filings.

A further $11 million was collected at the border by Customs, and a portion of this money - at least - represents funds taken away from consumers and the private sector via a wealth transfer to the Government.

Mr Lowe told Tribune Business that the auto industry, and wider economy, had to “wait for that cycle” of consumers adjusting their spending patterns and budgets for VAT to ‘play out’ before the new tax’s long-term effects on consumption could be determined.

“We’ve got to wait until we see it all shake out,” he affirmed. “Talking to people [other auto dealers] in the region, they said it takes anywhere from four to six months, so there’s still a long ways to go.

“It [VAT] throws everybody for a loop until they adjust and realise what their budget can bear. It ain’t pretty.

“Everyone is saying they are down. It’s not just the auto dealers, but the wholesalers and others.”

Mr Lowe added that BMDA members would “keep plugging away”, meeting all their obligations and trying to maintain salaries and workforce levels, until the economy worked through VAT’s impact.

“My crystal ball is not working, so we’ll just say positive, try to get some sales going on, and hopefully work it out for the country,” he said.

The BMDA’s upcoming Car Show, scheduled for mid-April, will likely provide the industry with a good indication of how the 2015 full-year performance will likely pan out.

“We’ve certainly got high hopes,” Mr Lowe told Tribune Business, “but we just have to play it out.

“It’s not the best market we’ve ever seen, but interest does seem to be picking up a little. The issue is just turning them into sales.”

He said auto dealers were also concerned that uncertainty over the strength of consumer demand for new autos was making it increasingly difficult to judge ordering patterns and manage inventory levels, given that the sector was buying six months in advance.

“Some people are complaining that where they are ordering six months in advance, and they have inventories coming, sales are not that great, so there’s a concern there,” Mr Lowe said.