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Auto Dealer Chief Warns: ‘I’M Considering Quitting’

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) president yesterday said he was “seriously thinking” of exiting the auto business, with the 5,180 increase in vehicle imports highlighting the “over-saturated” market’s woes.

Fred Albury, who is also principal of the Auto Mall, told Tribune Business that several auto dealerships were likely to close in 2017 unless current industry trends were reversed.

He added that the figures released by the Nassau Container Port’s operator, which showed a 5,180 year-over-year rise in vehicle imports during the 12 months to end-June 2016, exposed how the Bahamian auto market had “switched”.

Mr Albury said that with no increase in ‘new car’ sales recorded by the BMDA or its members, the vehicle import increase seen by Arawak Cay Port Development Company (APD) related entirely to used ‘autos’.

With ‘new auto’ dealers still unable to generate the vehicle sales so essential to profits, Mr Albury again railed at the ‘unfair competition’ posed by roadside vendors who - without the same overheads and tax-paying obligations - were able to undercut established, legitimate businesses.

The Auto Mall chief said he planned to further downsize his business in 2017 in response to prevailing market conditions, exiting the ‘used car’ business himself and shrinking operations at his Wulff Road site “considerably”.

APD said vehicle imports during its 2016 financial year were 1,905 more than expected, and Mr Albury told Tribune Business: “The numbers speak for themselves.

“That’s where the market is. There was no increase in the new cars. That’s strictly used cars. That tells you the amount of used cars coming in over the past year, and shows you how much the market has shifted.”

‘New car’ sales for 2015 were down 38 per cent year-over-year in the aftermath of Value-Added Tax’s (VAT) implementation, dropping to around 1,600. And the 2016 first half produced little sign of improvement, with BMDA members reporting a further collective 8 per cent decline.

“At this rate, you can anticipate the demise of some of the new car dealers early next year,” Mr Albury predicted. “I’m seriously thinking of getting out of the business.

“I can’t survive like this. I can’t deal with this. It doesn’t make any sense throwing good money after bad. It’s approaching the end of the year, and I can’t sleep at night wondering how to pay Business Licence fees.

“There’s no protection for legitimate businessmen who are paying VAT and Business Licence fees. You’ve got these individuals by the roadside able to bring these cars in. There’s got to be a two-way street here.

“The market is over-saturated, and I know it is because every day I get one or two phone calls or 10 e-mails from suppliers in Japan begging me to buy used cars from them. It means that companies have shut down, and it’s just the individuals buying from them.”

Mr Albury said it would likely be far more profitable for him to close the Auto Mall, put 80 persons out of a job, shed all his existing overheads, infrastructure and tax-paying obligations, and join the roadside vendors by importing vehicles under his own name.

“I might as well close up shop, import vehicles, put them on the roadside, advertise them in The Tribune and social media,” he continued.

“Buyers will come to me, be happy, and I don’t have the bureaucracy of the Tax Compliance Certificate every month. When you get waylaid by so many taxes, and bureaucracy coming at you left, right and centre, it’s tough. We’re just asking for a level playing field.”

Mr Albury’s comments should trigger ‘alarm bells’ in the Government, given that the auto industry is a major economic contributor to the Bahamas, both from an employment and activity perspective, and revenue for the Public Treasury.

The consumer shift in favour of older, lower-priced vehicles means that the Government’s yield per auto has reduced in terms of import duty/VAT, thus impacting its fiscal position.

New auto dealers, who were already having to contend with high tax rates, have suffered significantly since the 2008-2009 recession and subsequent slow recovery, due to the lingering effects on consumer spending and disposable income.

The addition of VAT, and frequent shifts in taxation rates, coupled with ever-increasing ‘red tape’, have further impacted the sector, as has the existence of the Price Controls that depress profit margins.

“The hurricane didn’t help matters any,” Mr Albury told Tribune Business of the Auto Mall. “Our operation in Freeport took a heavy hit, and we were on the verge of closing the operation there.

“We kept it going; I don’t know for how much longer, and are going to downsize the operation here to meet the business model we find ourselves in; the operating environment.”

He explained that this would involve not replacing staff who left the business, and moving its Suzuki brand next to Toyota. Mr Albury said his Wulff Road site would be “downsized considerably” to a stacking and preparation area as he exited the ‘used car’ business.

Auto Mall will continue to focus on its service and parts business, as Bahamians seek to keep their existing vehicles operational for longer. Saturday openings have been started.

Yet Mr Albury added: “The vehicle sales, the area you really need for profits to keep the doors open, that has diminished considerably.

“I don’t know what else to say. Those little Mickey Mouse used car operations on the side of the road are taking quite a toll.

“Talking to some of the other car companies, they’re just holding on. Thank God their shareholders so far have had deep pockets. If you’re losing money, it doesn’t make sense to hold on. It’s better to close the doors, stop the bleeding, and stop the red ink.”

Any auto industry downsizing, Mr Albury acknowledged, would have consequences for other businesses and the wider Bahamian economy.

“Drive through Palmdale and you see the number of businesses that have closed up, many ‘Mom and Pop’ operations,” Mr Albury said. “That’s hurtful. We’re finding ourselves in some rough, tough economic times.”

Mr Albury urged the Government to follow Trinidad’s lead in passing legislation that would require all persons seeking to import vehicles to the Bahamas to first obtain a permit.

This, he added, would enable the Government to crack down on the roadside vendors importing multiple vehicles, and ensure they operated from fixed premises and paid all due taxes - thereby creating the ‘level playing field’.

Comments

alfalfa 2 years, 7 months ago

I wonder if Mr. Albury remembers when he and his brother Jeff started Quality Auto Sales, which was strictly a used car company that competed with all of the other bigger companies who were selling new and used cars. His business has grown tremendously over the years and he should be commended for being so successful. On the other hand, he is a hypocrite when he whines about others bringing in used cars, and competing against him, as this is what he himself did to get started. He is acting as if the car market is his alone, and he wants govt. to do something or he "may" close down. These people are doing exactly what he did, but now it is wrong. Sad.

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Well_mudda_take_sic 2 years, 7 months ago

Our community is rife with rumours that certain politicians and customs officers have significant corrupt business ties to the road side vendors of used cars. As a result our Public Treasury is being cheated out of millions and millions of dollars of custom duties not collected on the used vehicles through fraudulent valuation and re-invoicing schemes. Now our looney tune government will also have to deal with the unemployment fallout as many of the large auto dealerships find they have no choice but to wind down their operations and possibly close their doors for good.

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The_Oracle 2 years, 7 months ago

Remember the Hobby shop that was in Palmdale, back in the 60's? Closed because every body else started selling toys. Licensing criteria is not enforced, licenses are handed to political cronies, other are denied, Just a small example of "our ways"

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Sickened 2 years, 7 months ago

Fred, just join the PLP and carry their card and then you don't have to deal with all of the taxes or electricity bills or customs duties. You can still vote FNM or spoil your ballot.

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alfalfa 2 years, 7 months ago

The Bahamian people are being forced to purchase used cars, as the prices for new cars are out of reach for all, but the wealthy. New car dealers will lament that their prices are high because of import duties , and operational costs. They kill you on parts and service on the vehicles you purchase from them. They are not angels and everyone of them would take a "customs" deal if it becomes available. They say their margins are small and yet they continue in business and bring in new cars by the hundreds. They work out deals with local banks to give low down payment, high interest rate loans, and then tie in the insurance companies with sky high, full comprehensive premiums, eventually resulting in many vehicles being re-possessed. Big businesses are saying they can't compete with small businesses? Sounds like B/S to me.

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John 2 years, 7 months ago

It is not only the auto dealerships that are suffering because of the changes in the system where consumers now have access to international markets and can import their own goods, cars included. Alibaba, the Chinese rival to Ebay and Amazon. Com has reported that their sales soared by 55% last quarter and the company now enjoys a record annual sales to $5.14 billion. This is more than the sales of Amazon and Ebay combined. And this is despite the local China economy is in a slump. In fact on line shopping is expected to grow even more as the delivery system for smaller packages is enhanced by the use of drones and smart phones become even smarter. While the local auto dealerships may not have to re-invent the wheel, they, along with other retailers will have to find a way to compete with the on line shopping and may have to come up with incentives to capture the local customers. One benefit to persons who import cars is they only have to pay for the vehicle up front. Then they have up to 12 weeks to come up with the freight and duty when their vehicle arrives in the Bahamas. And even Bahamas Customs is streamlining the customs/vat/duty process where it is user friendly and persons can have their vehicles and other imports cleared within a matter of hours after they arrive in the Bahamas. The banks are now converting all their bank cards to either credit or debit cards and so even the payment process is easier, both for the car purchase and the payment of freight and duty.

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Economist 2 years, 7 months ago

The government, by adding 75% tax on cars has deliberately priced new cars out of the reach of the average Bahamian.

The government wants to keep Bahamians down. The have dumbed down education and taxed the average man to the point that he has to beg the government for everything.

The average Bahamian is nothing more than a slave to his master government.

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MassExodus 2 years, 7 months ago

Two sarcastic words; Surprise, surprise!

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The_Oracle 2 years, 7 months ago

Destroy the private sector and indeed you reduce the revenue for Government to waste, However, the politicians care not whether they sit atop gold or dung, They already have their gold, and will share the dung amongst themselves. The people will keep getting nowhere, satisfied with nothing.

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Reality_Check 2 years, 7 months ago

Who in their right mind would spend a fortune in taxes on a new car in the Bahamas today given the very poor quality of most roads? The moment you drive a new car off the dealer's lot it is worth at most half of what you paid for it and much less than what you owe the bank. This is one of the reasons why the greedy business model of the consumer banks is doomed to eventual failure in a big way, especially as the middle-class in our country continues to shrink at an ever increasing pace.

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