Eleven car dealers close, survivors gear up for sales recovery

Marcella Scarlett, Business Reporter

The used car sector lost eleven dealers last year, none of them major players, but their exit caps another bad year for auto traders that not even government intervention was unable to fully counter.

The used car dealers traded more cars last year than in 2009 and 2010, according to Trade Board data on import licences issued, but the numbers show that it was still their third-worst year.

New car sellers also did better last year with 22 per cent more cars imported for sale.

Not only have 11 used car dealers shuttered their businesses "due to the harsh realities", but more than 40 per cent of remaining companies have not renewed membership in the Jamaica Used Car Dealers Association (JUCDA).

The year before, New Line Motors, one of the more high-profile operations whose business straddled the new and used car sectors, was among the firms that shuttered. Its former home on Constant Spring Road has been taken over by hardware company Tile City.

New Line was the dealer for Chinese-made Chery QQ.

Former managing director Ian Lyn directed questions to owner Harry Benjamin, who was not reached for comment.

JUDCA membership fell at yearend to 41 from 70; the Automobile Dealers Association (ADA), however, was steady at 19 members. There are two new car dealers that are not members of the ADA.

Lynvalle Hamilton, president of JUDCA, said the business closures were mostly small players and some were start-ups that seemed inadequately financed. He declined to name the dropouts.

Still, both segments of the market see scope for improvement in business conditions this year.

"I think there are better days ahead," said Hamilton. "We wouldn't want another year like this one."

The Trade Board issued 14,319 vehicle import licences in 2011, or 2,765 more than the amount recorded in 2010 and 2,186 more than 2009, but still making it the third-lowest level of trade activity seen since at least 1997.

The uptick in business was bolstered by a change in tax policy last May that cut the duties on auto imports.

Licences to used car sellers outdid new car dealers two to one: 9,506 to 4,806.

Better prospects coming

The ADA said its members sold 4,623 cars last year, and sees even better prospects opening up in 2012.

Just last week, ATL Autohaus, which deals in VW and its associated luxury brand Audi, said it expects a 100 per cent rise in Audi sales this year.

ATL Group CEO Adam Stewart announced a target of 614 units for the Audi brand, or a doubling of sales, at the groundbreaking for a new showroom in New Kingston, which suggests that sales in 2011 would have topped 300 units.

The ATL Automotive division sells VW, Audi, Honda, Land Rover, Range Rover and Jaguar.

Its competitor, Stewarts Auto Sales, the official BMW dealer in Jamaica, sold 212 BMWs, according to sales and administrative manager David Read. Stewart's also deals in the Mini, Mercedes Benz, Suzuki, Mitsubishi, and Honda bikes.

"If things continue as they are now, we expect to have a reasonably good year," said ADA chairman Kent LaCroix.

"Overall there are no real problems," added Hamilton. "If things remain as they are now, I don't see the prices going back to where they are coming from, but if they do then those prices are going to kill us."

The reduction in the CET "saved the industry," he said.

The Golding administration cut CET rates from an average of 40 per cent to 20 per cent on motor vehicles, allowing new and used car dealers to sell at cheaper prices. The adjustment, which occurred at the same time that a spark had been lit in the real economy, led to an immediate rise in consumer demand for cars.

The rate reduction resulted in increased sales of almost 200 per cent for new cars and 30 per cent for used cars, said the sector representatives.

The ADA suggests that its sales could have been even more robust were it not for the fact that inventories were low at the point of peak demand.

Prospective buyers hit showrooms immediately after the rate reduction was announced, but the new car dealers did not have enough stock to sell due to a sourcing problem linked to external events.

One of their major supply markets, Japan, was hit by massive tsunami and earthquake in March, hobbling car makers and parts suppliers there. Later, in October, massive flooding occurred in Thailand.

Still at the close of the year, new car dealers had seen a strong rise in business — from 3,930 of import orders for their showrooms in 2010 to 4,806 in 2011.

For the used car dealers, while they could have gone into other markets to find vehicle to import, the group said market preferences limited supply options: Jamaicans do not have an appetite for left-hand drive cars, which would come out of the United States; and Singapore was unable to supply vehicles that conformed to the previous three-year age limit on used imports.

The bullish outlook on 2012 is again linked to both external and internal events: The Japan auto market has now bounced back; a new supply opportunity has opened up elsewhere; and the Jamaican Government last November adjusted its vehicle import policy to increase the age limit to five years.

"We have seen increase in sale since the laws was amended in November," said Hamilton.

And: "Now we are getting supplies because the rent-a-car businesses in Japan are looking to change their fleet, so a lot of these cars are put to auction and this has been pushing the prices down, and because the prices fall off you find a lot of people looking to buy cars. Things are getting back to normal because these rent-a-car businesses were not selling out their fleet last year," he said.

Thailand remains a problem for new car dealers. The supplier of brands such as Mitsubishi, which is a big seller in Jamaica, has not got back to full production.

Currency exposure also affected dealers importing vehicles from Japan.

"That hit us hard," said LaCroix.

Last year, the Japanese currency peaked at ¥84.67 to the US dollar in April and stayed above ¥80 up to mid-July.

At the close of the calendar year, the currency traded at ¥77.25 to the USD.

The highest demand in the auto market was for SUVs. Used car dealers said they were unable to satisfy clients as the prices were "sometimes higher than the price of a new car" and unaffordable.

But SUVs accounted for 45 per cent of sales to the new car dealers, followed by sedans with 26 per cent of total sales. There was also great demand for used family cars seating seven persons.

marcella.scarlett@gleanerjm.com