The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A leading Bahamian auto dealer yesterday backed the Government’s move to switch the industry’s duty structure to one based on import size, but railed against rates that are “strangling” new car and commercial sales.

Andrew Barr, sales manager at Friendly Ford, told Tribune Business that while the former Ingraham administration had been correct to encourage Bahamians to purchase smaller vehicles, with an eye on reducing fuel imports and benefiting the environment/health, its 2010-2011 Budget had set Excise Tax rates too high.

As a result, even though Bahamas Motor Dealer Association (BMDA) members collectively saw an almost 16 per cent increase in new car sales for the nine months to end-September 2012, Mr Barr said both the industry and the Government were losing out.

Tribune Business understands that new car sales are still more than 42 per cent below pre-recession levels, and Mr Barr yesterday said that lower duty rates might stimulate more sales, translating into increased imports and inventories, plus higher tax revenues for the Government.

And Mr Barr added his voice to those of other dealers suggesting that the inexpensive Korean brands, Kia and Hyundai, were the ones dominating the market and driving all the growth.

To prove his point, the Friendly Ford executive told Tribune Business that between them, Kia and Hyundai new car sales were 297 units ahead of 2011 comparatives for the first nine months this year.

Collectively, total BMDA member sales for that same period were up by 248 units year-over-year. As a result, Mr Barr said the other eight new car dealer franchises must have seen a collective reduction in sales by 49 vehicles year-over-year.

Acknowledging that he had “mixed emotions” about the switch from a landed (CIF) value duty structure, Mr Barr told Tribune Business: “On a personal note I feel the way the Government assesses duty on engine size is the correct way to go.

“But the duty rates are too high. It has caused imports of vehicles to stagnate. Duty at 85 per cent has pretty much put the nail on the coffin of commercial vehicles.

“They’re on the right track with the cubic capacity of engines in terms of the duty structure. That is the way to go to encourage a reduction in the size of engines, more fuel efficiency and a reduced level of fuel imports.”

The Friendly Ford executive, though, reiterated that by setting duty rates too high, the Government was “strangling the new car industry, strangling commercial vehicles to the point where they’re almost non-existent”.

“Government has to look at the rate of duty they’re charging with a view to encouraging the dealers to increase the volume of vehicles they’ve brought in,” Mr Barr added.

“By reducing the duty rates on engine capacity, more vehicles will be sold, inventories will increase and there will be more revenue for government. They’re not generating the income they’d like to earn.”

Arguing that the Government was earning little from right-hand drive, used Japanese vehicle imports, Mr Barr urged the Christie administration to enact legislation banning the importation of vehicles more than five years old.

Stating that he had been against bringing in Japanese cars 10-12 years-old, he told Tribune Business: “We’re not doing ourselves any favours by flooding the market with vehicles of that age.

“I’d support legislation prohibiting the importation of vehicles older than five years.”

Noting that Friendly Ford had not followed the lead of other dealers, Mr Barr said: “We took the high road and decided not to import and sell used cars.

“We would have only contributed to the huge downturn in the market. It’s totally saturated with the unregulated importation of vehicles that are generating very little revenue for the Government.”

As for Friendly Ford’s current new car sales, Mr Barr said: “Things are not good. We’re holding our own. We’ve reached the point where we’ve had enough bad months back to back where it makes you think: ‘Things aren’t getting any worse’.

“We haven’t seen any significant improvement. We haven’t seen any significant reduction right now.”

For the first nine months this year, BMDA members have seen a collective 15.8 per cent increase in new car sales, rising from 1,566 in 2011 to 1,814 in 2012 - growth of 248 units.

For the 2012 third quarter, he added that BMDA member sales were up 19.9 per cent from 448 to 537.

While that looked an impressive performance and a sign of broad-based market recovery, Mr Barr said it was all being driven by the Korean models, Kia and Hyundai, which accounted for “55 per cent, maybe 60 per cent” of the new car industry’s sales.

Describing Hyundai as the market leader, Mr Barr said: “The overall position is that if you’re just crunching the numbers and using that as a measure of deciding whether the industry is showing improvement, you’d say we are.

“But the overachievers, and a big percentage of that market’s sales, are Kia and Hyundai. All of that increase relates to Kia and Hyundai. If you look at the other eight dealers, they are struggling.”

For the first nine months in 2012, sales of new Kia models had increased by 60 - from 377 to 477. And for Hyundai, unit sales were up 237, Mr Barr said, from 291 in 2011 to 528.

Together, those two brands had produced a 297 unit sales increase, some 49 more than the overall 248 vehicle rise for all BMDA members. This implied that the other dealerships have seen a sales decline collectively for the first nine months in 2012.

“The rest of the dealers are caught in a quagmire,” Mr Barr told Tribune Business. “Friendly Ford is a sole franchise, and for us it’s very critical looking at those numbers.

“We’re loyal to the brand, loyal to the staff. Even with this recession, we’ve still been able to not release one person even though are sales numbers are down 50-60 per cent. We haven’t let anyone go because of the recession.”

Noting that it was very difficult to predict future sales trends, Mr Barr said that unless key determinants such as the duty structure changed, “as long as the recession continues people, not out of choice but out of necessity, will continue to purchase Korean vehicles”.