The president of the Bahamas Motor Dealers Association (BMDA) said the industry planned to take up “the very outdated policy” of price controls with the government, adding: “We have to let it go.”
Ben Albury told Tribune Business in a recent interview that price controls on new and used vehicles, as well as auto parts, were unnecessary given the level of domestic and foreign competition in a sector that must work with “very thin margins”.
Confirming that the issue is a long-standing concern for car dealerships, he added that price controls were becoming increasingly obsolete “in a capitalist market” where alternatives were “at the fingertips” of the consumer via Amazon and other online sites through which they can order auto parts and research vehicle purchases.
“Hopefully at some point we can meet with the government and try to discuss it,” Mr Albury told the newspaper. “That’s been a point for a long time. I understand monopolies in food have to be price controlled, but in parts and cars we work on very thin margins with lots of competition.
“People can jump on the plane to Miami; it’s not like we’re the only show in town. Consumers can go down the road and buy from a competitor. I think the price controls on vehicles and auto parts are a bit outdated. I think we are in a capitalist market and we have to let go.
“There are so many options these days…Amazon, and everything is at your fingertips, and if my prices aren’t competitive, consumers won’t come to me.” The market will dictate. Mr. Albury’s argument is that there is more than enough competition in the automotive vehicle and parts market to prevent price gouging from dealers and suppliers.
Industry sources have confirmed that the maximum markups, or margins, that dealers are allowed on new and used cars currently stand at 25% and 15%, respectively. Auto parts are higher at 75%.
“I think the BMDA may have a few other things to discuss [with the Government], but I think price controls will definitely be part of that,” he added. “When it comes to cars, it’s just a very outdated policy.”
Nassau Motor Company (NMC) Director/COO Rick Lowe added, “Name the country that controls prices. Cuba? When prices rise, the government gets more rights. They don’t cut taxes to lower prices, but they do control dealer margins. It’s like gasoline. When the price goes up, the government earns more than the retailer and the wholesaler. »
While Mr Albury called for the lifting of price controls in his sector, he agreed they should be maintained in industries such as food and gasoline as a means of protection for low-income Bahamian consumers. . However, he is far from the only representative of the private sector to argue that such measures should be removed.
Sir Franklyn Wilson, the chairman of Arawak Homes and Sunshine Holdings, recently argued that price controls “will do nothing” and will prove useless in protecting Bahamians from “stunning” cost increases after the US inflation recently hit its highest level in 40 years.
He cited the Rent Control Act as an example of price regulation that created unintended consequences. “A major impediment to the construction of rental housing in this country has been rent control,” the president of Arawak Homes said recently. “The government would do well to abolish it.
“Rent controls have the effect of discouraging investors from getting into rental real estate. There was a time in this country when high profile investors were big players in rental properties and they are gone. People like Gerald Cash were major investors involved in properties and rent control helped kill him.
The Rent Control Act limits the annual rent charged for a rented “dwelling house” to 20% of its assessed value. Traders, too, have frequently denounced what they see as an outdated regulatory mechanism, but increases in the cost of living will likely create growing public pressure for price controls to be extended beyond breadbasket foods. and other items within their current mandate.
Price controls were originally imposed by the government to prevent what it saw as an unscrupulous merchant class from exploiting low-income Bahamians by unreasonably raising the price of basic foodstuffs and other commodities, thereby placing them out of reach while undermining the standard of living.
However, opponents argue that it is an outdated and distorting mechanism that creates more unintended consequences than the problems it solves. They can lead to product shortages, while retailers and wholesalers must raise prices and markups on items that are not price controlled to compensate for selling these products as effective “loss leaders”.
Mr Albury, meanwhile, acknowledged that inflation was “eating away” incomes and living standards in the Bahamas by raising the prices of several items ranging from building materials and luxuries to daily necessities such as food and gasoline.
“It’s a tough time to do business, and it’s a tough time for the consumer,” he added. “Everything is piling up all of a sudden. Gas is up, food is up, the housing market is up but wages are holding steady.
With the supply of new cars from the Bahamas and around the world having slowed due to a combination of microchip shortages, production backlogs and supply chain issues resulting from the COVID-19 pandemic, the chief of the BMDA said there was increasing pressure on the occasion. car prices due to the growing demand for their use as a substitute product.
US used car prices were up 40% year-on-year in January 2022, and Mr Albury added: “Even Japanese used car prices have skyrocketed, and it all boils down to new car production being lagging behind, to say the least. , driving up demand for used vehicles.
“You pair this with all the shipping increases, and it just causes a chain reaction. Japanese vehicles are no match for American used vehicles. I would say it’s probably 10-15 percent. This is partly because shipping prices have gone up. Japanese vehicles are usually very expensive but, although delayed, I can get them. American vehicles are extremely far behind.
“I have vehicles that I ordered last February  and I don’t have a production date yet. This is wreaking havoc on the market everywhere because people are unable to acquire new vehicles, driving up the price of used vehicles. When you add in the shipping costs, it just throws everything out of whack. Most production managers tell us it will last the rest of the year.
Mr Albury said a friend in the US motor vehicle retail and wholesale market had informed him that he could get higher prices for used vehicles now than what he had paid to acquire them two years ago. “In the used car market, this is unheard of,” he added. “You would expect some year-on-year depreciation, but now they’re saying the same vehicle two years later gets a higher price. It’s a crazy, crazy market right now.
The automotive industry is probably one of the most regulated and taxed sectors in the Bahamas. While electric and hybrid vehicles are subject to a 10% excise tax; and petrol cars with engine capacity up to 1.5 liters a tax rate of 25%; those with engines of 1.5 to 2 liters and more than 2 liters are taxed at 45% and 65%, respectively. Commercial vehicles are also subject to a tax rate of 65%.