Tension is growing between new and used car importers with both claiming that there is not a level playing field. The car industry has changed dramatically since 2009, when sales of used cars overtook those of new ones.
Since many owners will this year be paying off their five-year bank loans and face higher road taxes once their cars hit the five-year benchmark – they may be considering buying again. Both sides are anxious to see what whether the trends will change.
For decades, the sector was fairly stable but in 2009, the registration tax was changed to a formula which included emissions as well as the car’s value – and was cut to almost a third. The market was thrown into turmoil. The new car and used car importers were suddenly faced with a new ball game: people were flying up to the UK to buy second-hand cars – lured by a favourable sterling rate – and drive them down. And as people showed off their purchases, others jumped onto the bandwagon, eventually encouraging transport companies to offer transporters to bring their cars down to Malta.
Until now, the statistics masked the extent of this phenomenon as the figures issued by the National Statistics Office only listed the number of cars licensed each year as new or used – for the latter category without distinguishing between cars bought by individuals or through dealers.
However, correlating the figures with trade statistics (representing the cars brought in by dealers) has given the first indicative numbers. Between 2009 and 2013, 29,223 used cars were brought in by individuals, compared with 13,555 by used car dealers.
During these same five years, new car dealers only sold 27,971 cars – just under 40 per cent of the total.
This means that 41 per cent of all the cars licensed here were not bought through either new or used-car importers.
The associations representing the two sectors were not willing or able to comment at this stage and dealers from both sides of the fence were reluctant to add fuel to the fire by speaking on the record. But there is clearly a lot of bad blood.
The new car importers feel that there is an unlevel playing field which is distorting the market, for a variety of reasons. Some of them who have been around for decades are clearly incensed by what some described as “cowboys”, who only set up a few years ago.
“The attitude is that used car importers are trying to earn a living while new car importers are the rich who make huge profits off the backs of the customers. No one takes the trouble to understand where the difference in price comes from!” one new car importer said angrily.
“We have spent literally millions over the years to abide by the very high standards imposed by the companies we represent. We have to have top-level showrooms and servicing facilities, and we have to be able to help owners throughout the whole lifetime of their car. We have annual audits and intense training.
“But used-car importers rarely specialise in any particular car and they have no servicing centre or spare parts. If the client has problems with their car, they usually have to come to the official agent,” the importer said.
“It does not help that we are scrutinised by Mepa and the authorities when we want to invest in our showrooms while used-car importers just park their cars on the road!” one bitter importer said.
The new car importers claim that those buying used cars themselves are often duped.
41%
of car owners rejected both new & used car dealers
“Of course you do not hear about many cases. Do you think someone is going to admit that they were cheated? We know about the problems because they come to us to sort them out. And we find a number of cases of tampered mileages and so on,” the source said. Most of the tension emanates from the registration system and the Transport Malta valuation on which it is based.
With a new car, the registration tax is paid on the total invoice, a considerable proportion of which might be for extras. However, with used cars, the valuation – and subsequent registration tax – is based only on the price of the car itself.
Another anomaly is that TM revises the valuation of a new car upwards at regular periods. If a new car remains unsold in the showroom, the registration tax on it will be charged at the higher valuation, eating into the dealer’s profits. But if the car is used, then its value does not change or goes down, meaning that the used car dealer makes more money if the car remains in the showroom for any length of time.
It does not help that the valuation was adjusted for non-EU cars in the last Budget, which raised a number of eyebrows – and resulted in not only Japanese cars like Toyota being brought in from there but also European brands like BMW.
Used-car importers have their own gripes. They cannot understand why only exclusive agents should be able to sell particular brands as new cars.
“We can buy unsold new cars from dealers overseas – they usually have to take a certain quota if they want to keep the franchise – for a considerable discount as they need to get rid of them to make room for new stock.
“But we can only register them as used, and to qualify as ‘used’ they must be at least six months old or have 6,000km on the clock. So we end up registering them in another member state, or driving them down from the UK, or putting them into storage... Does that make sense?” a used-car dealer asked.
“If this clause were removed, customers would not be forced to get new cars only from the exclusive agents but would have more choice and the competition would drive down prices. Isn’t it in the government’s interest to encourage more new cars rather than used ones?”
What is the impact on the customer of all this? Perhaps one aspect that has been overlooked is the value of cars on the second-hand market, which plummeted.
“The price of a second-hand car is based on the price of a new one so clearly there was an impact,” one new car importer said.
Another impact of this shift is environmental. The average age of passenger cars had gone down to 11.5 years at one point but has now crept up again to 14 years, according to one importer.
“Individuals tend to buy cars that are a few years old, but dealers would get older ones as they want to maximise their profits,” another new car importer said.
What is their solution? The new and used-car importers seem to agree on one thing: removing the registration tax completely.
“Of course it would have an impact on government revenue! But we employ over 1,000 people. Why doesn’t the government worry about what would happen to them if the situation goes on as it is now?” another new car importer said.
“We have been discriminated against for years. Our problem is that we are patient and try to find a solution instead of shouting and stamping our feet.
“Why do you think that there have been so many mergers over the past years between car agents? It is the only way to survive. But for how much longer?”