The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas Motor Dealers Association’s (BMDA) newly-elected president yesterday voiced optimism that the VAT rate cut could spark a 10-20 percent uptick in consumer auto purchases.

Ben Albury, Bahamas Bus and Truck’s general manager, who has replaced his long-serving namesake, Fred, told Tribune Business that even a two percentage point cut in the VAT rate could spur increased sales activity given that the tax was felt more keenly on “big ticket items” such as vehicles.

“I think it’s god for the industry because that’s where we feel it the most; on the high-ticket items,” he said of the planned VAT rate cut to 10 percent. “It’s one thing when you’re buying small, but in buying large items that two percentage points can make a big difference literally.

“I’ve realised a big percentage of our sales are commercial deals with businesses. In those cases it does not have any impact, as all businesses who are VAT registrants can claim the tax back as an input or credit. On the consumer side, they can’t do that, so I expect it to make a big difference.”

When asked how big this difference would be in terms of stimulating vehicle purchases, Mr Albury replied: “I would say maybe 10-20 percent. I think it’s [the cut] going to alleviate a lot of the other expenses that people have to deal with day to day, including with their vehicle, such as when they buy tyres, when they buy gas. Any type of relief will be welcome.”

Given the high unemployment and under-employment levels associated with COVID-19, as well as the reductions in salaries and working hours for many, some observers are likely to view Mr Albury’s forecast of a rise in vehicle sales as somewhat optimistic. Consumer confidence remains low, and it is unclear whether this can be restored solely by cutting the VAT rate.

However, the newly-elected BMDA president added: “I just did some work on my house, and a two percentage point difference on that larger scale restoration, that would make a big difference - especially for week-to-week cash flow.

“If you purchase big ticket items that’s where you feel VAT the most. I sold a vehicle to a gentleman last week and VAT was just under $10,000. It’s a big ticket item but all relative to scale. It’s adding up.

“I’ve heard people talk about the breadbasket items, but I’m hoping the cut encourages people to spend more as the economy continues to open and hopefully that results in the Government collecting more revenue as people go back to work. I was happy to see the removal of the curfew. It’s a step in the right direction.”

Mr Albury also described the imposition of price controls on the Bahamian auto industry’s vehicles and parts as “always the white elephant in the room”. He told Tribune Business: “It’s been discussed with successive governments, and more and more in this age I don’t see the need for price control in the automobile industry.

“It’s a very, very competitive industry as it is, especially with consumers able to shop offshore. We have to regulate ourselves to some degree to remain competitive in the market. If I out-price on vehicles and parts, people go elsewhere. We make far less on new and used cars than the Government allows, and far less on parts.

“Where it’s removal comes in handy is that I may get a deal on parts. I may get a deal on filters. Let’s say I’m selling them for $8 and get a deal for $7, which means I can sell them at a higher profit. But right now I’m tied to a price-controlled mark-up and cannot do that.”

Describing price controls as more suited to a “socialist” economy rather than the free market system that The Bahamas professes to be, Mr Albury said that while he “understood” the need for such regulations on food and other essentials there was sufficient competition in the auto sector to keep prices keen.

Disclosing that there were no pressing “hot topics” for the BMDA to discuss with the Government, he added: “A lot of the issues we are facing are from external sources we don’t have any control over. The number one priority is finding inventory.

“Number two priority is shipping and logistics, and number three priority is getting what we want when we need it. A lot of dealerships cannot get any inventory.” Both Fred Albury and Rick Lowe have stepped down as the BMDA’s long-serving president and treasurer, respectively.

Ben Albury said the duo had “decided to let the younger blood take the reins”, although both will be available to offer support and advice. Besides Ben Albury as president, the new Board features LJ Albury, of Omega Motors/Auto Mall, as vice-president; Dwayne Higgs, Whim Automotive, as secretary; and Jason Watson, Automotive Industrial Distributors (AID), as treasurer.