Reduced duties won't lead to higher car imports - dealers

McPherse Thompson, Assistant Editor - Business

Automobile traders are dismissing any suggestion that the reduction in import duties announced by the Government last week may be at variance with Jamaica's energy policy, partly, they say, because the high-volume importation that characterised the sector at liberalisation is no longer a feature.

Finance Minister Audley Shaw has cut import duties on vehicles, including SUVs.

The dealers say the lower duties are meant to be offsets to higher price quoted by suppliers, especially in the Japanese market.

"You are not going to have the high volume of vehicles coming in as some people are suggesting, neither on the part of the used nor new car dealerships, as happened in the past when dealers were able to stock vast numbers of vehicles," said Kent Lacroix, chairman of the Automobile Dealers Association (ADA).

Shaw announced last Thursday as he opened this season's Budget Debate that the common external tariff on motor cars would be reduced from 40 per cent to 20 per cent.

The Ministry of Energy and Mining did not respond to queries about the effect, if any, of the new measure on Jamaica's national energy policy and, hence, the country's spiralling oil bill, which stood at US$1.4 billion at the end of last year.

Experts contacted said they were unable to make informed comments at this time about the implications on the energy policy.

Both La Croix and Lynvalle Hamilton, president of the Jamaica Used Car Dealers Association (JUCDA), said their membership were appreciative of the Government's move as a needed business boost.

And they both disagreed that a reduction in the taxes would adversely impact the national energy policy, which seeks to ensure that the country minimises the effects of volatile and rising crude oil prices, takes advantage of renewable resources and promotes conservation and efficiency in the use of energy resources.

"The energy policy is about efficiency, and new vehicles are more efficient than older ones," he said.

Moreover, "Vehicles have to be available because people need them to undertake their work and business. Vehicles have to be available to drive the economy, to drive commerce."

Notwithstanding, he said, Jamaicans will not see a lot of foreign exchange shifted overseas to pay for motor vehicles, because of the slowdown in the domestic market, which he blamed on two to three years of high import duties.

Dealers would also be constrained by the cost of purchasing vehicles, mostly in Japan where the yen reached a high of 85 to the US dollar in April after a brief slump following the earthquake and tsunami in March.

In the past, he said, dealers were able to stock inventory but were no longer inclined to do so because the carrying costs have been very high, and this has meant that over the past two years there has been less and less imports.

Lacroix said dealers were now going into business more consciously.

"So you won't see a vast amount of vehicles being brought in. They are very shrewd business people and they are not going to bring in an oversupply, they are not going to overextend themselves. They are not going to bring in large volumes they are not sure they are going to sell," he said.

The sector is expecting that business would pick up, "provided all of us can have supplies", - a reference to the drop in production by plants such as Honda and Toyota since the earthquake.

JUCDA's Hamilton said before the reduction in the CET Jamaica had one of the highest import duty structures in the Caribbean region "and now it's among the lowest."

He disagreed with any suggestion that importing more vehicles would create a burden on the country's oil bill and that a more efficient public-transport system could be substituted.

He suggested, for example, that the buses used by the Jamaica Urban Transport Company were far less efficient and consumed far more that "what they call our gas guzzlers", such as Range Rovers and SUVs generally.

Hamilton also said used-car dealers were not anticipating importing as much as they did in the past, but now that the Government has moved to reduce the duties, "we believe that sales will pick up".

For the past four months, he said, "there was stagnation in the market and the result was a significant decrease in the revenue to the government, because cars were not selling because of the high duties."

He said the JUCDA would also be moving to continue lobbying the Government to extend the age limits of used cars allowed to be imported from three to five years.

mcpherse.thompson@gleanerjm.com