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The battle rages on as foreign-used cars quota is reviewed

Published: 
Wednesday, March 16, 2011
Philip Knaggs, president Automotive Dealers Association of T&T Photo: Keith Matthews

 

The long battle between the importers of new and foreign-used cars rages on. The foreign-used car industry, which is well over 15 years old, has always been blamed for many problems, from traffic on the roads to being not roadworthy to encouraging car theft rings. In 2007, the then Government implemented a quota system for the importation of foreign-used vehicles. It was argued that fewer foreign-used cars on the roads would reduce traffic.

During this period, Inshan Ishmael, then president of the Pre-Owned Car Dealers Association, took to the streets of Port-of-Spain to block what he saw as a big threat to the survival of the used car industry. In 2008, the Government introduced a motor vehicle tax on small engines and increased taxes on all other engine sizes. Late last year, the new Government released the Draft Policy to Regulate the Used Car Industry Report.

The report recommended that the annual quota of vehicles should remain at 13,500/year for the period 2011 to 2013.  (See table)
 

CAR MARKET 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 TOTAL
TOTAL NEW VEHICLE MARKET 7,281 7,246 8,328 10,206 12,136 14,095 16,305 18,889 12,140 12,355 131,336
USED VEHICLES 11,117 16,322 15,754 16,176 18,827 19,035 21,797 20,520 13,704 10,929 175,110
TOTAL NEW & USED MARKET 18,398 23,568 24,082 26,382 30,963 33,130 38,102 39,409 25,844 23,284 306,446

Economic contribution

Right now, Philip Knaggs, president of the Automotive Dealers Association of T&T, which represents new car dealers, is arguing that older foreign-used cars coming into T&T would make this country a “dumping ground.” Visham Babwah, president, T&T Automotive Dealers Association (TTADA), one of the main foreign-used car dealers, has made the case that the industry is too important to the economy for it to be destroyed.

Babwah estimates that at least 10,000 people are directly employed in the foreign-used car industry, with thousands more employed in spin-off industries. “Some of the spin-off businesses include buffing, cleaning, painters, upholstery and other businesses. Apart from the 10,000 that the industry directly employs, there are thousands more people who are indirectly employed by the industry.”

He added there are roughly 200 used car dealers in the country. Philip Knaggs, president of the Automotive Dealers Association of T&T (TTADA), which represents new car dealers, is arguing that older foreign-used cars coming into T&T would make this country a “dumping ground.” Knaggs told the Business Guardian on Monday that the foreign-used industry has its “place” in T&T’s economy.

Knaggs believes, however, that the industry must be regulated. “We agree that the foreign-used industry has a ‘place’ in our economy but, given the nature of the product and given the fact that there are more than 300 registered foreign used (car) importers, it is obvious that the industry has to be regulated to provide consumer protection,” he said.

He argued that the industry is importing “used” products and questioned if there is any mechanism to determine the true age of those vehicles. Currently, foreign-used cars no older than four years are allowed to be imported.

Industry survival

Last month, stakeholders in the car industry met with Trade Minister Stephen Cadiz at a consultation at Centre Pointe Mall, Chaguanas. Cadiz agreed to review the quota system for imported used vehicles and to review the criteria for determining the age of a vehicle. He did this after hearing recommendations from TTADA, which has 90 members and the smaller T&T United Motor Dealers Association.

Babwah claimed that the previous administration made life difficult for the dealers by some of the policies it implemented. These policies include introducing a motor vehicle tax in 2008 on small engines, $5 per cc and increased the tax on all small engines. The foreign-used cars dealers get a 25 per cent tax rebate on the motor vehicle tax on small engines.

Despite this, Babwah said the industry has survived because most people consider it an alternative to new cars which, he said, are not even necessarily superior. “All foreign used cars are imported with airbag and anti-lock braking systems. Some new cars aren’t even imported with airbags.” He added that to ensure that standards are maintained in the industry, the TTADA has suggested an international company test the cars to make sure they are roadworthy before they land in T&T.

Knaggs said the Ministry of Trade must protect consumers and ensure that these foreign used vehicles are inspected by the Bureau of Standards and that a one-year (or 20,000 kilometre) warranty is given to each and every customer.

Cheaper cars

Apart from the industry’s contribution to the economy, Babwah said the foreign-used market caters for middle-income and lower-income consumers. “Before the foreign-used cars came to this country 16 years ago, the new car dealers had a monopoly. Now consumers have a choice in the market,” he said. He said if the Government allows the foreign-used car dealers to bring older cars of up to six years old, the prices for these cars will be reduced considerably.

“We want see foreign-used cars at $60,000 where anyone can afford to buy them,” he said. Knaggs said if the public wants cheaper cars, then all the Government has to do is decrease the duties and taxes on smaller new vehicles. This way, the public could easily afford a new car, with three-year warranties and proper support. “Foreign-used imports should be restricted to vehicles with engine sizes of no greater than 1.6 litres,” Knaggs said.

According to statistics provided by Knaggs, the foreign-used market accounts for 33 per cent more sales than new vehicles in the past decade. “This has put immense pressure on the local new vehicle dealers who continue to remain committed to providing proper dealership support to their customers. “Maintaining a high level of service and parts support to the public, with equipment purchases and proper technician training, is very costly. The new vehicle dealers will always be considered stable and will continue to truly stand behind their product,” he said.

Knaggs predicts that the new car market will remain “flat” this year compared to 2009 and 2010 levels. “Since the onset of the world economic crisis in the latter part of 2008, sales of new vehicles in T&T have decreased substantially down to levels not seen since 2005,” he said.

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