By NEIL HARTNELL
Tribune Business Editor
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’.