The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

New auto dealers yesterday voiced optimism that the industry’s 28.1 percent sales increase for the year to end-September indicates “one hell of a roller coaster ride” has finally ended.

Rick Lowe, the Bahamas Motor Dealers Association’s (BMDA) secretary, told Tribune Business that the sector was hoping the improvement - driven largely by a 68.75 percent sales surge in the 2019 third quarter - is evidence that the “long, slow slog” to recover from the 2008-2009 recession is nearing its end.

He revealed that industry-wide sales for the three months to end-September were some 209 units up on 2018 figures, with the sector finding some 1,285 new car buyers for the first nine months compared to 1,003 for the same period last year.

While “government fleet” purchases were likely to have boosted 2019 sales, Mr Lowe added that “there was a general slight upward trend” in the market as well. And while it was too early to assess any potential impact from Hurricane Dorian, he said his own dealership had already concluded several vehicle replacement sales to clients on Abaco and Grand Bahama.

Fred Albury, the Bahamas Motor Dealers Association’s (BMDA) president, echoed Mr Lowe in telling this newspaper that the data suggested the new auto industry has finally “bottomed out” and is starting to trend upwards following “a rough ten years”.

He added that the benefits from the government’s excise tax rate cuts, spanning two successive budgets, and deferral of border tax via “bonded” facilities, were starting to take effect and had been “a tremendous help” in enabling the sector to achieve a competitive “level playing field” once again.

Mr Lowe, describing the improved momentum as “very badly needed” following a decade in which sales plunged as much as 70 percent from their pre-recession levels, expressed hope that “it can be sustained all things considered with Dorian”.

“I think the reduction in import taxes has helped tremendously, and it’s finally now catching up,” he told Tribune Business. “The last quarter was about equal to the year before, and this quarter has seen a dramatic rise. It was very needed.

“It depends on whether there’s any more fleet sales to come in, but there was a general upward trend which is important.”

The government slashed the excise tax rate for new autos with an engine size of 1.5 litres or less by 40 percentage points in the 2018-2019 budget, dropping the levy from 65 percent to 25 percent. Besides aiding the sector and individual dealers, it was intended to encourage consumers to switch to smaller, more fuel efficient and environmentally friendly

Then, following industry representations on behalf of dealers who had no inventory in that category, the Minnis administration enacted further reforms to “level the playing field” between dealers by cutting the Excise Tax rate for vehicles with engine sizes between 1.5 and two litres to 45 percent.

And it has also enabled Bahamian auto dealers to defer Excise Tax and VAT normally payable at the border on imported vehicles until such time as they are sold through the use of so-called “bonded” facilities.

Mr Lowe said these measures had combined to revive a long-struggling industry, now that dealers had been able to adjust product line-ups and inventory ordering cycles to suit the new taxation structure.

“It’s a huge difference,” he told Tribune Business. “So far it has held our projections true that with lowering the import tax rate we’ll do more volume.... They’ve [the Government] been very understanding of the plight of the local industry, which is a positive thing, without giving direct cash incentives - something I don’t think is a good thing.

“As long as the economy can hold there should be some growth. It takes time once policy changes are made for it to take full effect.”

Recalling the debilitating effects of the industry’s post-recession struggles, Mr Lowe added: “It’s been a long slog, my friend, a long slow slog. Minimal profits, expenditures increasing, so it’s nice for a change to see things trending in a different direction.

“It’s been a constant cut expenditure, cut expenditure, don’t maintain this and put something off a bit to catch up some cash flow. That’s where not paying the import taxes at the port has been a huge, amazing help to us, and it doesn’t seem to have impacted government revenues. There seems not to have been a decline. I thought there would be a dip at first, but there wasn’t.

“Hopefully the industry and our associates will be better off in the next six to eight months if things continue. What we’ve been through has not been easy, but has been worth it. We had hoped they would give us a bonded facility for parts, but that has not materialised.”

Mr Albury, meanwhile, agreed that sales trends had been “a bit upbeat” due to a combination of fleet sales to the Government and hurricane replacements, as well as the positive impact from the recent tax changes.

“It’s been a tremendous help,” he said of the latter. “It’s brought a lot of product into the price range that people can afford. It’s been very encouraging for persons to buy new vehicles. Some dealers do not have vehicles at 25 percent, but have stuff at 45 percent, so it’s levelled the playing field for everyone. Everybody has product to sell at a reasonable price.

“The Government made a good decision because they’re realising more revenue from VAT, due to increased sales of high-priced new vehicles compared to the used car market, so their revenues should be a lot stronger.

“I think it’s been a win-win all around. Consumers are happy with it, the Government is getting more revenue and dealers are selling more product to keep their doors open.”

Voicing optimism that the Bahamian new auto market had “bottomed out and, if anything, is starting to bump up again”, Mr Albury added of the past decade: “It’s been a hell of a roller coaster ride. It’s been mostly going down. It’s been a rough 10 years, a really rough 10 years. It’s a little more encouraging where we are today.

“But the industry is changing constantly with hybrids, plug-in hybrids and electric cars and so forth. We have to contend with that situation. It’s an ever-changing situation in the auto industry right now. We’re in a new technology era. Toyota next year is going to showcase a lot of new technology which I’m looking forward to seeing.”