JUCDA reverses course on vehicle pre-inspections - Policy driving up business in auto market, pressures Japan dealers
The used-car sector is walking back its howls of protest over the pre-shipment inspection policy for motor vehicles that they initially pronounced would have been the death knell of vulnerable dealers.
But that was last year.
Now, some 16 months into the July 2017 roll-out of the system, President of the Jamaica Used Car Dealers Association Lynvalle Hamilton says despite initial misgivings, the policy is working to the benefit of the sector.
In fact, used car imports are likely to hit a new peak, Hamilton told the Financial Gleaner.
"It's not as bad as we thought," he said of the pre-inspections that have been farmed out by the Jamaican Government to a Japanese firm. "It releases us from certain liabilities and we welcome it," he said.
Hamilton now says dealers were not against the policy goals which were put in place to curtail the sale of vehicles whose age and damage history were fraudulently misrepresented to auto buyers but rather, they were contesting the implementation, which they estimated would be costly and unaffordable.
"It did affect it [costs] somewhat; but we also had the opening up of the Singapore market and that really helped to cushion the blow," he said.
"All the dealers have reported that they have seen a cut [in total revenues] but the impact that we thought the pre-shipment inspection implementation would have had did not amount to the deleterious effect that we thought," he said.
Used car dealers mostly import vehicles from Japan. With the pre-inspection system, which requires the cars to be certified prior to entering Jamaica, the dealers have gone looking for
bargains in other markets to offset some of those costs and maintain healthy profit margins.
"The vehicles out of Singapore are in high demand because they come with a lot more features like leather seats, rims, and a lot more. The market has really taken to those vehicles and as a result of the opening up of the market the blow that we thought that we would have had from the Japanese market, we did not feel the effect," said Hamilton, who runs his own pre-owned car dealership called Auto Channel Limited.
The Financial Gleaner first reached out to JUCDA regarding the increased number of vehicles that are seen on used car lots across Kingston. But while at first blush, the volumes seemed t be suggesting that the market had gone soft and unsold inventory was piling up, Hamilton said the opposite was true.
The numbers indicate, he said, that more dealers have been entering the market, that imports are up, and that cars are being sold at a rapid pace.
The auto import permits granted were not immediately available from the Trade Board, but Hamilton said he expects the vehicles brought in this year to set a new record. The new market dynamics, he added, also give small dealers an edge, because they don't have the same overheads as the big players and can outsell them through underpricing.
"My understanding is that there are a lot of new players coming into the market, with everybody recognising that you can 'eat a food' so to speak," he said.
"The bigger players are taking a hit because if there is a player who is not set up according to government policy ... and therefore have less overheads and as a result they can outsell the bigger dealers by underpricing," Hamilton charged.
Those and other changes have seen cheaper cars entering the market, and here it is the Japanese dealers who are feeling the pressure.
"You can look at say a typical Corolla it comes from Japan as the Axio with a 1500-1800cc engine. You could get a similar unit out of Singapore 1800 cc Altis with leather seats and rims for as much as US$5,000 less," Hamilton said.
"The Japan suppliers have taken the hit and we could literally see that, so the markup that they would have normally taken, they have reduced it significantly," the JUCDA president said.