By NEIL HARTNELL
Tribune Business Editor
A leading dealer says he reduced new auto imports by 80 per cent during 2015’s fourth quarter, in a bid to align them with a market that has shrunk by more than one-third.
Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, told Tribune Business that his Auto Mall business would likely reduce new vehicle imports by a further 25 per cent in 2016 to better match inventory with sales.
He added that this, and 2015’s decline, would “severely impact” Government revenues derived from the auto industry, which is one of the sectors it relies on most heavily for taxes.
And, from an industry perspective, Mr Albury said the shrinking market was likely to drive consolidations and closures among auto dealerships.
He added that the current downturn was the longest, and deepest, he had seen during his years in the sector.
Mr Albury was speaking after the BMDA revealed data confirming that new car sales fell by 38 per cent year-over-year for 2015, with the most pronounced decline coming in the fourth quarter.
That period, which was up against tough comparatives given the pre-Value-Added Tax (VAT) sales rush, saw a 57.56 per cent year-over-year drop.
The rest of 2015 was not much better for BMDA members, with sales down 32.17 per cent, 26 per cent and 30.29 per cent for the first, second and third quarters respectively.
Tribune Business understands that, for the full year, new auto sales were down by between 900 to 1,000 vehicles, although Mr Albury put the figure at closer to 800.
With the average selling price of a new auto around $30,000, based on Mr Albury’s figures the Bahamian new car industry saw a $24 million year-over-year revenue decline in 2015.
The BMDA chief was spot-on with his previous prediction to Tribune Business that new auto sales would close 2015 some 38 per cent down, and he said: “The crystal ball was working in full force, and it tells me that things will be the same this year.
“All in all, the market was off by about 800 units. That’s going to be a tremendous impact, especially from the Government revenue aspect. It’s a loss-loss situation all around. I don’t think there will be any changes this year.”
Mr Albury said many BMDA members had responded to the sales slowdown by reducing new vehicle imports, in a bid to reduce inventories and the associated ‘carrying’ costs.
As a result, ‘used’ vehicles are now taking an ever-larger share of the import market - a development that negatively impacts Government revenues.
“The dealers have been trying to reduce inventory down to the level sales are at,” Mr Albury told Tribune Business.
“For us we have scaled down considerably on imports because we have excess inventory, and I know one of the other big dealers also slowed down on imports.
“In the last quarter of last year we had hardly anything coming in, as we were trying to get rid of 2015 vehicles to be in a position to have 2016’s come in,” he added.
“I would say we reduced imports by 80 per cent in the last quarter [of 2015]. And I think this year we’ll probably be down 25 per cent less on our imports than what we were last year.”
Mr Albury said the negative consequences from this were far-reaching, and not just confined to the auto industry.
“If the Government looks at its numbers, I’m sure they will see revenue from the auto industry was severely impacted in the last quarter of the year,” he told Tribune Business.
“With sales being off 38 per cent, they can expect the Business Licence fees collected to be off 38 per cent as well.”
Mr Albury expressed concern that the new auto market could take another hit from discounting by some retailers in a bid to move excess stock, fearing this could depress prices further.
He credited the Government for seeking to minimise VAT’s impact on the sector by changing the Excise Tax calculation basis to landed cost, and by deferring the 7.5 per cent border levy until the time of sale.
Excise Tax rates were also lowered to a uniform 65 per cent, but Mr Albury said the Government could do little to aid consumers with reduced disposable income/spending power as a result of its decision to implement VAT.
While suggesting that the auto industry’s 2015 performance would be better compared with 2013’s figures, due to the late 2014 ‘pre-VAT’ rush, Mr Albury predicted that 2016 first half sales would be flat.
He added that he was “trying to put a little hope into the second half”, both in terms of a Baha Mar resolution and the Government moving to stimulate the economy prior to an election year.
“It’s fingers crossed, but I’m not going to hold my breath,” the BMDA chief told Tribune Business.
Asked what would happen to auto dealers if the market did not improve, Mr Albury replied: “You quite probably might see some consolidation and dismantling of companies out of this.
“I can’t see some of them, where sale are at now, being able to go long-term. If you’re losing $500,000 a year and you close down, you’re saving $500,000.
“I’ve been in the business long enough that I’ve seen the ups and downs, and you anticipate these things to happen, but it’s been a really protracted downturn.”