The Tribune

By NEIL HARTNELL Tribune Business Editor BAHAMAS Motor Dealers Association (BMDA) members saw their collective sales revenues fall by more than $75 million over the first 10 months of the years between 2009-2011, one dealer suggested yesterday, although current statistics indicate the sector is headed in the right direction. Admitting that his estimate was conservative, being based on an average new vehicle sales price of $25,000, Andrew Barr, sales manager and a director of Friendly Ford, told Tribune Business that the scale of the top-line decline showed just what an "outstanding achievement" it had been for Bahamian new car dealers not to lay-off staff in any sizeable numbers. Taking new car sales figures for the first 10 months of 2011 to end-October, and comparing them with sales figures for the same period in 2008, 2009 and 2010, Mr Barr said that "crunching the numbers" and applying 'dollars and cents' showed just "how drastic" the recession's impact had been for the industry. For the first 1o months of 2010, Mr Barr said BMDA members had collectively sold 1,725 new vehicles, some 53.8 per cent of the 1,495 and 1,494 sold during the same period in 2010 and 2009, respectively. All three years were well down on the 2,579 new vehicles sold during the first 10 months of 2008. "If you take the difference between 1,725 and 2,579, you're talking about being off 854 vehicles," Mr Barr told Tribune Business. "Take an average of $25,000 [selling price per vehicle], and that reflects a reduction in revenue to the BMDA of $21.35 million." Employing the same 'back of the envelope' calculation method for 2009 and 201o sales figures, which were down by 1,084 and 1,083 vehicles respectively, and the collective sales revenue reduction is $27.1 million and $27.075 million, respectively. Adding those two together with the $21.35 million estimated decline for 2011, and the BMDA - as a collective industry - has seen a $75.525 million reduction in revenues over the first 10 months of the past three years. The total decline is likely to be much bigger, when the full year pictures and higher average vehicle selling price is accounted for. "When you put that into figures, it's a tremendous amount of reduction in revenue, which is the operating capital of the business," Mr Barr told Tribune Business. "By any stretch of the imagination that's a substantial amount of money we're trying to recoup. "People do not put that into perspective. Revenue is what any company needs to stay afloat. When you reduce cash flow by that amount, but are still able to maintain your employee levels, as far as the BMDA's concerned, that's pretty outstanding. "The BMDA has been able to maintain employment levels through this crisis without laying anyone off. We sold more than 1,000 vehicles less in the first 10 months of 2009 and 2010, and 850 less in 2011. "We're looking at a reduction in revenue of probably in excess of $60 million, even $60-$85 million. It's admirable that the BMDA has been able to survive these hard times and keep employees employed, and not use them as an excuse to eliminate staff." While the industry's performance for October and 2011 to-date showed it was "heading in the right direction" towards recovery, Mr Barr told Tribune Business: "A lot of people don't really realise the depth of the problems the dealers have faced over the last three years. "It's a tremendous capital investment for dealers to pay for cars, pay duties upfront on the docks, and sales are pulled out from under them." And he added: "It's not the Government's fault. There's a worldwide recession, and it is what it is. But sometimes you have to realise the importance of the BMDA's health to the community, and where it stands." For the 10 months to end-October 2011, the BMDA said new vehicle sales were up 15.29 per cent compared to the same period in 2010. For October itself, sales volumes were ahead by 20.46 per cent year-over-year, confirming the continuation of a slow but steady recovery trend in the industry. Sports utility vehicles (SUVs) retain a 43.21 per cent share of the overall market, although this is understood to have dropped by a couple of percentage points from around 45.81 per cent, as consumers switch to relatively cheaper passenger vehicles. This segment has seen its overall Bahamian market share rise by around 5 per cent to 38.62 per cent, while commercial vehicles - largely due to the 2010-2011 Budget duty increases - fell by 11.02 per cent or around two percentage points to an 18.7 per cent share of total sales. Total BMDA member sales remain some 33.12 per cent down on the same period in 2008 when the market peaked, the organisation told Tribune Business. Patrick Knowles, the BMDA's interim president, told Tribune Business that the sales increase for 2011 year-to-date was driven by SUVs, but the growth was "not tremendous". "The biggest decline is in commercial vehicles," Mr Knowles added. "I would attribute that directly to the increase in duties from 60 per cent to 85 per cent. From our sales people here [at Tyreflex], they tell me the market is for the used commercial vehicles as opposed to the new commercial vehicles as a result of the increase in duty." Asked whether the 2010-2011 Budget tax increases on the auto industry had achieved their goal, Mr Knowles told Tribune Business: "If that was the objective it's obvious it's had the reverse effect, especially in the commercial vehicle market." Mr Knowles said the market was currently being driven by the cheaper Korean brands, such as Kia and Hyundai. The sales of high priced vehicles continued to be affected by the willingness of commercial banks to lend in an environment characterised by high levels of unemployment and non-performing loans. Asked when the Bahamian new vehicle market would recover, Mr Knowles told Tribune Business: "That's going to be a long, long way away. I think we have to have a tremendous rebound in the local economy first. People have to go back to work. 2007-2008 were banner years for the auto industry."