The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

New car sales for the 2015 first quarter fell 33 per cent year-over-year, with the Bahamas Motor Dealers Association’s (BMDA) president blaming Value-Added Tax (VAT) for “sucking a lot of potential out of the market.”

Fred Albury told Tribune Business that while visitor numbers at the weekend’s Car Show were better than dealers had expected, sales proposals stemming from the event were “probably down” 40 per cent year-over-year.

Suggesting that VAT had impacted consumer behaviour and buying patterns largely as expected, Mr Albury said the tax’s implementation appeared to have already driven a shift to buying used autos.

Pointing out that two-three used vehicle sales were required for the Government to match the tax revenue generated from one new car purchase, Mr Albury likened the Bahamian auto market to a “shrinking pie”.

The Auto Mall chief added that individual dealers had “to be aggressive” to get their share of a smaller market, and “do what they have to do to keep their doors open”.

“Let’s put it this way,” Mr Albury said of the two-day Car Show, which closed on Saturday past. “The expectation was not high due to the VAT scenario.

“It was a little bit better than expected. Friday was dead, but on Saturday I was pleasantly surprised that we had the amount of people come through that we did out there.”

Mr Albury said VAT’s implementation had created “a mixed cup of tea” for the Bahamian auto market.

While the 7.5 per cent levy’s impending implementation sparked a surge in late 2014 auto purchases, as Bahamians sought to avoid the tax, this exacerbated the reduction in 2015 first quarter sales due to many buyers moving their plans forward.

“We had a lot of impulse buying in the last quarter of last year, so that sucked a lot of potential out of the market,” Mr Albury told Tribune Business.

“We [the BMDA] just did the numbers. The numbers show that sales for the first quarter this year compared to the first quarter of 2014 are down about 33 per cent.

“Compared to the last quarter of last year, first quarter sales are down 57 per cent. I think it’s going to take some time to balance things out. I’m hoping that by the time we get to the second half of the year, we will be back to normal sales wise.”

The 33 per cent year-over-year sales decline for the three months to end-March 2015 is exactly in line with what the BMDA and its dealer members had been told to expect by their Caribbean counterparts. Dealers elsewhere in the region had reported sales fall-offs of around one-third in the first size months following implementation in their nations.

“Overall, people are dealing with what VAT is going to cost them on a day-to-day basis,” Mr Albury said. “Electricity, groceries, water, phone and cable.

“One person I was talking to, they and their wife - the children have left home - was estimating VAT will cost them $100 a week, or $400 a month.”

Pointing out that this translated into $5,200 in a normal year, Mr Albury added: “That could be a bank payment if someone wanted to purchase.

“I think there’s a ‘wait and see’ attitude there in some situations. Mr fear is, and it’s sort of been confirmed, is that the used car market is increasing.”

Mr Albury told Tribune Business this had been seen at the Auto Mall’s own used car department, while he had also been approached by a used car dealer wanting to rent space at his Wulff Road site to store 100 vehicles per month.

Pointing to the implications for the Government’s income, the BMDA chief added: “The tax the Government derives off one new car sale is tremendous. They’ve got to see two-three used car sales to derive comparable revenues.

“People can’t afford new cars, have to cut back and go to used cars.”

Mr Albury again lamented the Bahamas’s failure to follow the lead of other Caribbean countries and implement age restrictions on used vehicles coming into the country.

By ensuring used cars imported into the Bahamas are no more than four-five years old, Mr Albury said they would still be of “substantial value” to buyers; the Government would earn import taxes; and “a lot of junk” and the associated environmental implications would be eliminated.

While the Auto Mall’s various brands were still calculating the business done at the Car Show, Mr Albury told Tribune Business: “I would say we’re probably down 40 per cent over what would have been done last year.

“There were a lot of lookers, but not substantial leads [sales proposals written up]. The way we’re looking at it is the pie has shrunk out there, so you have to be aggressive to get your portion of the pie.

“At the Car Show and other events, you just have to do what you have to do to keep your doors open.”

Mr Albury said “the rule of thumb” was that out of every 100 Car Show proposal developed, around 10-15 per cent ultimately translated into completed sales.

He added that one boost this year resulted from the “very aggressive” competition among the commercial banks for scarce lending clients, with interest rates offered dropping to as low as 5.5 per cent - less than half, in percentage terms, the normal rates offered on auto loans.

“It’s just a sign of the times; the VAT era we live in out there,” Mr Albury said. “It’s going to take a while for things to be digested.”

However, Rick Lowe, Nassau Motor Company’s (NMC) director and operations manager, gave a slightly more upbeat assessment than Mr Albury of business prospects stemming from the Car Show.

“There weren’t as many people there,” Mr Lowe said, “but those that were seemed serious, and we wrote more prospects this year than last year. Fingers crossed.”