By NEIL HARTNELL
Tribune Business Editor
nhartnell@tribunemedia.net
New car dealers yesterday expressed "grave concern" over the 31.17 per cent third quarter sales decline, warning: "God helps us if this trend continues into 2018."
Fred Albury, the Bahamas Motor Dealers Association's (BMDA) president, told Tribune Business it was "not a pretty picture" in the industry, with the recent Car Show - normally a sales booster - proving "quite depressing".
And he made a call, likely to be controversial in some quarters, for the Government to further tighten regulations on used car imports, expressing concern that the Bahamas could become a "dumping ground" for aged vehicles that ultimately become an environmental and health hazard.
Mr Albury likened autos more than 10 years-old to "flat screen TVs and microwaves", suggesting that they were just as easily discarded when they broke down, and added that the Government was missing out on a significant revenue raising opportunity.
"There's a tremendous concern," he told Tribune Business of the near one-third drop in new car sales for the three months to end-September 30. "Sales are down considerably.
"We're not sure if this is because of the hurricane situation [Irma and Maria], and people got scared and tightened up. But it is of grave concern going forward.
"If this trend continues, God help us in 2018. We'll see the demise of some of these dealers. Either we're going to fade away or become a used car dealer like everyone else, bring in cars under my personal name, sell them on the side of the road and not pay any taxes."
Mr Albury's latter comment was made partially 'tongue in cheek', but there was little disguising the concerns over the new auto industry's continuing inability to rebound from the 2008-2009 recession almost a decade later.
The 31.17 per cent third quarter sales decline wiped out the 6.7 per cent increase enjoyed in the 2017 first half, pushing year-to-date sales for the first nine months down by 7.42 per cent compared to 2016 figures.
Mr Albury said BMDA members had been anticipating a recovery every year for the past four-five years, but none had yet materialised.
"I'm keeping my fingers crossed that was due to the hurricanes out there," he said of the third quarter plunge. "It's not a pretty picture out there; not a pretty picture at all.
"We had the Car Show a couple of weeks ago, and there was a lot of window shopping, but very few [sales] materialised up there. We're still following up on it, and there is some activity; people came in and looked, got invoices, spoke to the banks and have to follow up on documents.
"But it's nowhere where it was a few years ago," Mr Albury continued. "It was quite depressing up there to see an industry that I've helped to build for all these years, and the business, to see it slipping away.
"There's not much you can do about it. We'll have to see what 2018 brings around for us, but I don't think it's going to be much better than 2017. I think everyone is just in the mode of trying to keep their doors open and heads above water."
The BMDA president expressed scepticism over whether Baha Mar's full opening in 2018, and estimated 5,000 hires, would make a substantial enough impact to drive higher GDP growth and consumer spending.
"Hopefully this new government will have wrapped itself around the economy somewhat, and start to do things that spark some confidence and encourage people to buy new cars as opposed to cheap used cars," Mr Albury told Tribune Business. "It is what it is."
The new car industry is significant because, as a 'luxury good', its products - and their sales volumes - provide a good insight into the overall Bahamian economy's health and performance, especially consumer incomes and confidence.
The depressed economy, with high unemployment and reduced incomes, coupled with low consumer confidence, has been the main factor impacting new auto sales over the past decade.
Bahamian consumers have responded by keeping existing vehicles on the road longer, and have switched purchasing tastes towards less expensive 'used' cars.
Apart from these trends, other contributing factors working against new car dealers are a combination of buyer difficulties in obtaining bank loans; VAT's introduction; already-high Excise tax rates; price controls; Business License fees; and real property tax increases. All these forces have worked to push new auto prices beyond many Bahamians.
Arawak Port Development Company's (APD) just-released 2017 annual report exposes the dramatic shift in consumer demand towards used vehicles, and its impact on new auto dealers.
Disclosing details on the bulk vehicle import business it obtained in December 2014, APD said: " The port began receiving an average of 1,200 to 1,400 cars imported monthly from the Asian markets, which did much to offset a sluggish economy and an underperforming construction industry.
"The aim is to enable the release of 120-150 vehicles per day consistent with staff quota. This new business has involved close co-operation among the agencies, stevedores, APD and the Customs Department."
Mr Albury yesterday estimated that 95 per cent of these vehicles were "cheap used cars", whose minimal valuations meant they contributed little to the Public Treasury in terms of tax revenues when compared to more expensive new vehicles.
"The hurtful part is that the Government gets very little revenue out of it," he told Tribune Business, "and these cheap used cars not only impact new car sales but also the banks, the body repair shops and the insurance companies, who sell less comprehensive insurance.
"When you sell used cars there is a lot of trickle down to other industries, but these used cars are like flat screen TVs and microwaves. When they break down, you throw it away. Who has to clean it up? Us.
"When you buy a car that's eight to 10 years-old, you drive it for a year and, if you have an accident and the repairs are worth more than the vehicle, you throw it away and buy another one."
Mr Albury said the preference for used cars meant there was less lending by banks, while the inability to obtain comprehensive insurance meant drivers were less likely to seek out body shops for repairs following an accident.
With abandoned and/or derelict vehicles littering many Nassau communities, the BMDA chief again called for the Government to introduce an environmental levy; reduced age limits for imported vehicles; and/or a licensing system to restrict the number of autos persons can import in their own name.
These suggestions are likely to be resisted by some, on the grounds that they are 'anti-competitive' and will hurt 'the small man', but Mr Albury has repeatedly said all he and BMDA members are seeking is a regulatory and taxation 'level playing field'.
"The Government, given the need for revenue, is missing an opportunity here, and it's going to cost them more in clean up fees to get these used cars out of the country and disposed of in an environmentally friendly way," he told Tribune Business.
"We've put the wheels in motion to create some dialogue with the Ministry of Finance on this issue as it's having a tremendous impact all around, not just on the industry.
"The banks are not lending money. That's why bank fees are going up because they're not earning interest. Whether you like it or not they have to keep their doors open, as people are not borrowing money. That's out of a bank manager's mouth. That's the long and short of it."
Mr Albury also warned that the Bahamas would lag in introducing new auto technology that was environmentally friendly, such as hybrid and electric vehicles, if new car dealers continued to be swamped by used autos and went out of business.
"It's the new car dealers that keep the country on the cutting edge of technology," he said. "If we close our doors we will just be importing these cheap used cars. The Bahamas and other jurisdictions will become a dumping ground."
Comments
John 6 years, 5 months ago
Since the early part of this year, many businesses have been like a deep wound on the shoulders of their owners, bleeding uncontrollably, and with every effort to stop the hemorrhaging, or even controlling it, failing. Obviously many business owners or operators saw the change in government as an event that would breathe new life in the economy and get things moving again. At least a return to a climate of moderate if not healthy profits. Apparently not so as the actions of the Minnis administration have been more of shock and awe and have left consumers less confident that before. In fact mostly food orientated businesses and some shipping companies are managing to turn a profit. Even most banks are operating in the red. And the "For Rent" signs are being put out 'en masse', meaning that some businesses are only holding out through the holidays before they go out of business, for good. In the case of car dealerships some may argue that they may never see days of healthy profits, at least not in a long while, and at least not while current economic conditions persist. And like with other on-line shopping, the Bahamian consumer has ordered vehicles from all the way on the other side of the world. And their confidence continue to grow, because, for the most part, they receive a product that is above expectations or satisfactory at the least. Unlike the experience has been with other on-line shopping where products have been overpriced or their quality inferior. Some even counterfeit brands. So Albury and his partners must eventually accept the fact that the change in the auto industry is a permanent one and like many other businesses. And sitting and waiting for the tide to turn may take more time and resources than he has.
BahamasForBahamians 6 years, 5 months ago
The Bahamian economy does not depend on new car dealers.
In the early 2000's the offshore bankers cried about the collapse of the industry when Papa did what was necessary to avoid us being blacklisted.
We thrived and the economy survived it.
This will be no different Fred. You must adjust to the changing times - not call on government to support your hackneyed - obsolete business model.
JohnDoe 6 years, 5 months ago
Mr. Albury give me a break and put on your big boy pants and stop crying and start acting like a darn competent businessman. Your business model is simply obsolete. All cars imported into this country pay the same taxes that you pay. I obviously do not get it, that people just cannot afford your overpriced and very expensive cars that only last two years before a major repair is necessary even before you finish paying the interest on your loan.
Economist 6 years, 5 months ago
The local New Car dealers are not competitive in their pricing. That aside, if they provided an excellent service then perhaps a buyer could justify the expense.
BUT their service is poor. Half the time they can't fix the problem. It seems that their technicians don't understand the new computerized cars. They don't appear to be able to diagnose the problem that the computer tells them that they have.
And, unlike dealers in the US, they don't provide you with a car even though it takes days or weeks to fix yours.
There is talk of WTO, I would like to see these local dealers have some real competition and then they might start running their businesses a bit better.
islandlad 6 years, 5 months ago
I agree 100% that there are far to many “unfit to be on the road” vehicles on the road. While importing used cars is part of the issue, which can be remedied by stricter importation laws for the quality/condition of said vehicles. We MUST start in our own house! There are far to many “Bribes” and under the table deals being done at the inspection stations.......the criteria is very basic (which we should add some additional points) and yet it is clear so many cars shouldn’t pass and/or couldn’t. Further, far to many drivers with no insurance or expired license driving these cars in terrible condition. Police should be setting up more random road checks for license and registration,........goes that cars need to be properly inspected with current documentation prior to any new registrations or renewals are offered.
sheeprunner12 6 years, 5 months ago
The government profits from car imports ...... new or old ....... don't expect any moratorium on private vehicles from this government - even though our streets are unable to accommodate the 300,000 vehicles in Nassau alone.
ThisIsOurs 6 years, 5 months ago
"nd he made a call, likely to be controversial in some quarters, for the Government to further tighten regulations on used car imports, "
My advice to them is don't get caught in the ice like the dinosaurs. People can't afford 30,000 dollar cars. Even if you stopped every single car import. They'll just catch the bus. Times have changed. If they were smart they'd shift their business model and start marketing the idea of used cars in excellent condition with available parts.
ThisIsOurs 6 years, 5 months ago
"#"The hurtful part is that the Government gets very little revenue out of it," he told Tribune Business, "and these cheap used cars not only impact new car sales but also the banks, the body repair shops and the insurance companies, who sell less comprehensive insurance."
I cannot believe this is the argument he's using , he sounds like Janitor Travis
Porcupine 6 years, 5 months ago
This is a very telling article if these are the best arguments we can put forth for complaining about why they refuse to change their business model. Perhaps we should ask the government to stop allowing electricity because our candle makers are suffering. People have the choice and they are making the choice. Bring in some reliable, cheap cars that the average Bahamian can afford. There is no indicator that Bahamians, by way of the Bahamian economy, the bank failures, falling wages and unemployment are going to be able to afford your cars anytime in the near future. Maybe you should push for a big raise for the MPs. You should be able to get a few extra sales out of that.
Well_mudda_take_sic 6 years, 5 months ago
Who in their right mind would want to buy a new vehicle from a Bahamian auto dealership? Our roads and parking lots are much too congested everywhere on New Providence resulting in frequent fender benders or dings and dents that quickly reduce the value of a new vehicle to a pittance of the exorbitant price paid to the auto dealer. Of course the auto dealers are quick to remind us that shipping, duty and VAT costs are responsible for their exorbitant new vehicle pricing, but that does absolutely nothing to help ease the financial pain for a buyer. And then the insurance companies also charge exorbitant annual premiums because they know the value of a new vehicle is significantly diminished the moment it hits our streets. This is also pretty much the same reason why the banks charge outrageous interest rates on new vehicle loans. The banks know the value of their collateral (i.e. the new vehicle) significantly decreases the moment the new vehicle is driven off of the dealer's lot. And most Bahamians do not have covered parking for their vehicles either at home or at work during the scorching heat of summer, which adds greatly to the wear and tear of both the exterior and interior of a vehicle. In summary, you would absolutely need to have your head examined if you bought a new vehicle today......unless of course you have plenty of money to foolishly throw away. But even then, new vehicle buyers are no longer looked at with any kind envy....instead they are now viewed by most in our society as fools....and our society knows how easy it is for a fool and their money to be easily parted! Many of also know that Mr. Albury has already taken steps to become much more of a used car dealer than a new car dealer because of these very same considerations. Rick Lowe at NMC had better quickly start doing likewise.
proudloudandfnm 6 years, 5 months ago
My brother this country is in deep economic trouble. Sales aint going up anytime soon...
Islandboy242242 6 years, 5 months ago
I agree with "this is ours" and "porcupine" trying to make an argument that its better for this person and that person that we all buy brand new vehicles is pretty poor. The reality, as stated, is a new car is a luxury item most of us cannot afford. Globalization is real in the 242 and not going anywhere, those that had an advantage based on limited shipping options, logistics etc have no choice but to adapt somehow.
bogart 6 years, 5 months ago
Actually a significant amount of new car sales happens to be by the govt in buying 30k plus cars for executives and other essential part of the job usage.
The private sector also buys 30k cars for executives and many look at the executive salary package to include a new car plus servicing, gas every so often or change of executive.
Looking at the difference in price for a decent second hand vs brand new the govt should look at second hand also.
ThisIsOurs 6 years, 5 months ago
This may be true but clearly thats not enough for their business to survive. They need to have some serious strategy sessions and determine the way forward. Don't listen to DAguilar, its time for big plans. I sure he in Superwash trying to figure out how to open 20 more stores by 2020
Clamshell 6 years, 5 months ago
“Grave concern”? I have grave concern about paying $70K for a car that would cost $30K in Florida.
ohdrap4 6 years, 5 months ago
I was so moved upon reading this article i setup a Gofundme page to buy condensed milk for Mr. albury.
OMG 6 years, 5 months ago
The reality is that these junk old cars arrive in excellent condition and at a price most of us can afford. When I bought a new Ford Ranger the cost was 0ver $18000 (14 years ago)yet the same vehicle was available in the USA for just over $8000. Added to which if you live on a family island and need guarantee work done then you face high shipping charges. I feel sorry for the Dealers ,they have an uphill battle but successive governments have stuck to these beyond stupid import taxes added to which we now have VAT which is self defeating as the average Bahamian cannot afford or wants to pay these exorbitant prices.
DDK 6 years, 5 months ago
" successive governments have stuck to these beyond stupid import taxes added to which we now have VAT" is too right. Such a shame that new governments by nature seem to have no problem leaving ridiculously high taxes in place, no matter the pain to the people who elect them.
Dawes 6 years, 5 months ago
As long as the used cars are in good enough condition (body work, and environmentally), plus the used car sellers pay the fees due to Government (duty, VAT, Business License) then there is nothing wrong with it, and the dealers will have to adapt to survive. If his worry is the clean up of the cars after they are finished being used, then all Government has to do is pass a law saying the car owner is responsible no matter what happens to it. They know who owns a car so if its found charge them.
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