The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A return to pre-2010 import duty rates would likely boost new car sales by “about 30 per cent”, dealers said yesterday, while calling on the Government to give them up to six months’ warning of planned import tariff changes.

Ben Albury, general manager at Bahamas Bus & Truck, told Tribune Business that while the industry would benefit in the medium to long-term, this year’s reduction in commercial vehicle duty rates had forced dealers to “dump off” existing inventory at a loss.

He was backed by Andrew Barr, sales manager at Friendly Ford, who told this newspaper his company effectively lost $40,000 through having to drop the prices of existing commercial vehicles to points consistent with a 65 per cent tariff - despite attracting the old 85 per cent rate when they were imported.

Mr Barr explained that Bahamian auto dealers had no choice but to do this, otherwise consumers would hold off on purchases until new inventory came in at the new 65 per cent rate, leaving them stuck with old stick.

“Any time you back track like that you have to lower the price of your vehicles to reflect the lower duty rate,” Mr Barr explained.

“The ones you have in stock, you sell at the lower Customs duty structure. You reduce the price back to 65 per cent duty, as opposed to 85 per cent, and end up having to discount the vehicles to get them to sell.

“That takes us down to pretty much cost price. We had seven-eight [commercial] vehicles in stock at the time of the reduction, and had to reduce them by $5,000 each. You’re talking about a loss of $40,000.”

Emphasising that the move to reduce import tariffs on new commercial vehicles, weighing 20 tonnes, “was a positive move, no question”, Mr Barr said the Bahamian auto industry needed advance warning of planned tariff cuts to avoid problems with inventory and price point management.

“We had no advance warning that the duty be reduced. We had vehicles in stock at 85 per cent duty, and we reduced them to prices consistent with 65 per cent because they wouldn’t sell at 85 per cent,” he added.

“People would wait two months and buy at 65 per cent. We had to reduce the price on commercial vehicles in stock and incur the loss as a result of that decision.”

He was backed by Mr Albury, who told Tribune Business that the duty rate change - announced in the Mid-Year Budget - resulted in dealers having to “dump off the stock they had prior to the new duty rate.

“I’m selling vehicles at a loss right now to clear out that inventory,” he said.

“In the coming months, as new inventory comes in, it’s a benefit, something that needed to happen, but it will be a couple of months before we start to see the benefits.”

And he added: “This thing [the commercial vehicle duty rate reduction] should be done with consultation, and dealers given some forewarning, say six months, so all ordering and inventory can account for the lower duty rates.

“That’s millions of dollars, and it makes it difficult to plan orders and stay thin with your stock.”

Mr Barr, meanwhile, added that commercial vehicles typically generated around 5-10 per cent of Friendly Ford’s monthly sales.

“We’re still suffering from manufacturers’ prices, but lower duty rates will have a positive effect on sales,” he added.

Neither he nor Mr Albury had received any contacts from the Government indicating it was looking at lowering duty rates, or altering their basis (engine size), in tomorrow’s Budget despite the Christie administration pledging to assess the burden on the auto industry in its Mid-Year statement.

While acknowledging that duty reductions would result in lower new car consumer prices, and this boost sales, Mr Barr said this had to be balanced with the Government’s revenue needs - and whether the increased sales volume would yield more taxes, not less.

And he also backed the former Ingraham administration’s decision to switch the basis for calculating auto import duties from CIF (landed or freight cost) to engine size, as this would promote the use of more fuel efficient, environmentally friendly, vehicles.

Describing the auto market as “very sporadic”, Mr Albury told Tribune Business that a return to pre-2010 duty rates across-the-board would boost vehicle sales “probably about 30 per cent”.

Stating that he was “optimistic” about the Bahamian economy’s prospects, Mr Albury said he was “expanding my model line-up” to appeal to all consumers and price points, with pre-owned, passenger, commercial and truck lines.