For those that missed it, this appeared in todays Express:
Brake on car sales
By Raffique Shah
Thursday, March 19th 2009
WITH motor vehicle sales plummeting in most parts of the world, new car sales in Trinidad and Tobago have taken a severe beating, although most auto-dealers are reluctant to speak about it. The leading brand in the world, Toyota, which overtook GM in the United States and globally last year to grab the No 1 spot, has seen grim sales of its popular Corolla and Yaris models thus far this year. A source close to the company said whereas it sold an average of 150 vehicles per month up to January 2008, this year's figures for January dropped to a disappointing 20-odd vehicles.
Mazda, which is sold by Southern Sales, and is another popular brand, saw its sales drop from around 50 vehicles per month to as low as 15 last month,
a source close to the company said. The second biggest seller, Nissan, which is controlled by Massy Motors, also has suffered a worrisome drop in sales, although officials at the company's Morvant head offices declined to speak with Business Express. It was a similar situation at companies such as ANSA Motors (dealers in Ford and luxury Land Rover brands), Lifestyle Motors (Suzuki), Diamond Motors, an ANSA division that sells the very popular Mitsubishi Lancer, Classic Motors (the Honda division of ANSA) and the up-market dealers like Bavarian Motors (BMW) and Sterling (Mercedes).
A cursory examination of trends in sales can be gleaned from the number of months it takes to go through a "series"-in effect around 10,000 vehicles, new and foreign used. The "PCC" series that started in January 2007, was sold out by April that year. PCD lasted all of three months, moving to PCE in July 2007. From that point the change in series started stretching: For example, the PCH series took four months, and PCK three months. PCL started in January 2009 and is chugging along very slowly
The slump in car sales accelerated after Government, in a bid to cut back on the number of vehicles clogging the nation's roads, raised the motor vehicle tax (MVT) significantly. When this was announced in the Budget presentation last September, motor companies-especially foreign-used car dealers-protested vociferously. The latter accused Government of denying the "poor man" a chance to own a vehicle. But with the global recession nipping at the nation's heels, Government saw an opening to cutback on consumer spending. New vehicle dealers went into an advertising frenzy, seeking to clear their stocks that had been imported at the old MVT rates. However, consumers were not responding the way they did in the previous five years.
Works Minister Colm Imbert, under whose portfolio the Transport Division falls, said during the Budget debate that the number of vehicles on the nation's roads had climbed from 300,000 a few years earlier to a whopping 500,000. In addition to the increase in MVT, prospective owners also faced rising interest rates at all banks for loans to purchase motor vehicles. The dealers hit back with incentives. The popular Ford Ranger "truck", for example, one of the lower-priced vehicles of its kind that became very popular among young vehicle owners, threw in a number of "freebies" to attract buyers. More recently, Diamond Motors offered its Lancers at a very attractive monthly-payment rate. Most other dealers have added "sweeteners" to woo buyers.
But many admit their incentives have failed to spur sales to consumers, most of whom are watching every dollar they spend on non-essential goods and services. While sales of lower-end vehicles were expected to decline in view of uncertainties about jobs and the overall economy, this trend has also hit the high-end markets. A knowledgeable source in the industry said that a significant and lucrative slice of the auto-market lay in the lease-purchase arrangements auto-dealers have with big corporations.
"Instead of buying cars for their executives, and other vehicles for those companies that have fairly large fleets, the better option was leasing vehicles," he said. "This came with a tax shelter, and usually such leases last for four years after which the individuals assigned such vehicles could choose to change them for new ones. What we are seeing are executives who are now buying back their vehicles when the leases expire as they watch the economic trends and wait before opting for new leases. So even among the fairly well-off the trend to hold back on spending on motors has slowed significantly. That spells bad business for car dealers."
The trend in Trinidad and Tobago is far from isolated. In fact, on a per capita basis, there may be more vehicles sold than in most other countries that are hardest hit by the global recession. Germany is one of the few countries in the world that saw an increase in car sales in February. This came about because the German government offered Ã¢â€šÂ¬2,500 in an incentive scheme to each individual who scrapped their old cars for fuel-efficient new vehicles. Elsewhere, the vehicle-sales story is much worse than it is in Trinidad and Tobago.
Japan's Toyota is projecting its first loss in 59 years of operations in 2009. The world's leading auto manufacturer expects to seek a US$2 billion aid package from the Japanese government to cushion the blow and repay some debts that must be repaid this year. But Toyota's problems pale by comparison with its more established rivals. In February, GM sales fell by 53 per cent; Ford say a 48 per cent drop; Chrysler 44 per cent; Honda 38 per cent; and Nissan 37 per cent. The only carmaker to buck the global downward trend was Korea's Hyundai which manufactures mainly low-end cars and commercial vehicles. Hyundai saw its sales rise by 14 per cent in January.
Most of the big auto-makers have also slashed huge numbers of jobs, or are about to do this, in order to face plummeting sales. Toyota, one of the first foreign companies to set up huge car plants in the USA and the UK, is planning job-cuts through attrition, VSEP packages and other voluntary programmes. Bloomberg News reported recently that Toyota has suspended work on a new plant in Mississippi slated to produce its Prius hybrid car beginning in 2010.
Meanwhile, Mitsubishi reported a 54 per cent decline in sales globally, its 11th consecutive monthly decrease. Chrysler, Ford and GM experienced a 30 per cent drop for the fourth consecutive month. In Japan, car sales plunged to their lowest levels in 37 years, while in France the picture was no different.
In fact, vehicle sales have fallen so badly, Bloomberg News reported that GM and Chrysler "could collapse by the end of the month (March) unless they get billions of dollars in emergency government loans." "As part of a renewed bid for a bailout, GM said it needs an immediate injection of US$4 billion to stay afloat until the end of the year, a fact it hadn't before disclosed. In total, the company said it needs US$18 billion in loans - US$6 billion more than it said it would need just two weeks ago," Bloomberg reported. Chrysler was seeking US$6 billion and Ford US$9 billion. Toyota, which expects an operating loss of US$4 billion this year, has asked the Japan government for a loan of just over US$2 billion.
With the global vehicle manufacturers "under the sword" in terms of sales, their distributors in Trinidad and Tobago will need to ride out the global economic storm. Those who spoke with Business Express said they had no plans to cut back on staff-not just yet. And except for Toyota, which owns and operates the local franchise, the motor divisions of most other distributors are relatively small parts of bigger, diverse companies. Neal & Massy and Ansa McAl are huge conglomerates for which their motor divisions form small contributors to their overall revenues.
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