The Tribune

By NEIL HARTNELL Tribune Business Editor THE 29 per cent year-over-year new car sales increase for the first two months of 2012 is "not a true reflection" of the anemic overall market, two Bahamas Motor Dealers Association (BMDA) members told Tribune Business yesterday, both suggesting the industry might benefit from the Bahamas switching to a Value Added Tax (VAT) structure. Both Ben Albury, general manager at Bahamas Bus and Truck, and Andrew Barr, sales manager at Friendly Ford, said the market performance was being 'distorted' by the "overachieving" Hyundai and Kia franchises, which were benefiting from falling into a lower duty rate (smaller engine size) than rival new car brands. The Korean currency's weakness on the international currency markets against the US dollar was giving the dealers selling those models a further boost, while other BMDA members' sales performances for the January-February period were either flat or down. Mr Barr told Tribune Business that year-over-year, new Hyundai sales had risen from 19 to 100 for the first two months, while Kia sales - according to BMDA data - had risen from 61 to 82. Collectively, their 102-unit increase for the first two months of 2012 more than accounted for the 88-unit rise experienced by the entire Bahamian new car market. Disclosing that collective BMDA member sales had risen from 301 to 389 year-over-year, a rise of 29.2 per cent, Mr Barr told Tribune Business: "If you take that at face value is shows an increase in sales of 88 units. "If you take that as evidence of the way the economy is going, on the surface you'd think that it's not bad, but if you analyse the figures and separate underachievers from overachievers, and fleet sales from retail sales, you'd realise that there are two franchises doing very well.... "My humble opinion is that in the broader market, from a consumer-driven point of view, most of the franchises are struggling. We have a couple who are doing extraordinarily well, due to favourable exchange rates and better duty rates on most of the vehicles." Bahamas Bus and Truck's Mr Albury agreed, telling Tribune Business that the 'headline' BMDA sales figure increase did not reflect the overall Bahamian new car market. He, too, pointed to the Kia and Hyundai model sales as driving the increase, adding that the Government's decision to change the auto industry's duty structure in the 2010-2011 Budget, and switch the determinant to engine size, had totally altered Bahamian buying habits. "The only part of the new car market seeing growth are models that come in at very friendly prices," he told Tribune Business. "It [the BMDA sales figure increase] is not a true reflection of the entire market." Sales figures released yesterday by the BMDA showed that new car sales were still down some 46 per cent from their 2007 'banner year' peak, as dealers gear up for the annual Car Show at the Mall at Marathon on March 30-31. The BMDA added that sports utility vehicles account for 42.9 per cent of current sales, with passenger vehicles and commercial vehicles, respectively, enjoying 44.5 per cent and 12.6 per cent market shares. Pointing out that most new car models had been driven into the highest 85 per cent duty bracket, due to their engine sized being above 2.5cc, Mr Albury said this had driven many buyers to the 'used car' market - either imported right-hand drive vehicles from Japan and the Far East, or US second-hand autos. Many of these vehicles, Mr Albury said, had "poorer fuel efficiency" and generated emissions more harmful to the environment. "It's also caused the theft rate to go sky high," he added, "because people are stealing old Japanese vehicles for parts." As for the auto industry's duty structure, now contained in the Government's new Excise Tax, Mr Albury added: "It could have been changed in a way that was more favourable. It's not a realistic structure." The Bahamas Bus and Truck general manager added that the increased duty rates had also sparked "a lot of invoice manipulation" in a bid to fraudulently lower duty rates, and said: "I think the Government is losing revenue there as well. "I think that if the Government looked at it, they would realise they made a mistake and seek consultation from the BMDA and alternative plans to consider, but unfortunately no one seems to be paying attention." He suggested that alternatives open to the Government were a higher duty rate on imported used cars, coupled with reduced duty bands for new vehicles that were based on engine cylinder numbers. And he added that replacing the current import-duty structure with a VAT-style tax was another viable option. This was echoed by Mr Barr, who adding that he was not an economist, said: "All things being equal, it seems to me the Customs duties are a little unfair in my humble opinion, in that they cause the consumer in all walks of life to pay the same amount for a vehicle." He added that "a VAT on all products and services", to be collected by all Business Licence holders and passed on to the Government just like National Insurance contributions, would reduce the cost of living by ensuring the bulk of taxes were "paid at the point of sale, as opposed to the point of import". This, Mr Barr said, would be "much more equitable" and enable Bahamian new car dealers to offer different prices to consumers rather than a 'one size fits all' approach. Apart from being "more equitable", a VAT would also broaden the tax base to include services, thus enabling the Government to earn the same or more revenues with potentially lower tax rates.