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Consumer is king of the road?

We all realise that the car industry in Malta has changed but have we really understood to what extent?

When the registration tax changed in 2009, and the sterling exchange rate was in our favour, people started looking at the prices of second-hand cars in the UK and realised that they could buy a sporty, high-end brand, just a few years old, for the price of a new, relatively boring family sedan. Who would not be tempted?

Until then, authorised dealers used to sell over half the new cars – 4,424 out of 8,381 in 2008. All of a sudden, everything changed. In 2009, a stunning 15,140 cars were purchased and registered in Malta – and only 5,404 were bought new from the importers. The rest were used.

The ensuing years saw over 13,000 cars a year brought into Malta and used cars surpassed new ones each year, even though the gap has narrowed somewhat.

But perhaps what has gone unnoticed is how many cars were bought by individuals who rejected not only the new car importers but also the used car dealers: 41 per cent of them over the 2009-2014 period.

Such a dramatic upheaval in any sector would be hard. It is perhaps even more dramatic when you look at its history. The new car importers are mostly family firms who have been around for decades, some of them building empires that were founded on their car business.

Used-car dealers, on the other hand, cover a whole spectrum, from those who trade second-hand cars parked by the side of the road with handwritten signs on them to ones whose showrooms are packed with luxury cars.

The two sides, as is clear from the main story in this Observer, detest each other, insisting that each side is exploiting loopholes and regulations that distort the level playing field. As we tend to do so often in Malta, we caricaturise the issue, reducing complex situations to black and white: New car importers write off used car dealers as “cowboys” who tamper with mileage and offer warranties that are impossible to invoke. Used-car dealers portray authorised dealers as greedy titans rubbing their hands with glee because they have exclusivity over their brands and can raise their profit margins.

Maybe that was true. Maybe it still is to some extent. But the reality is that some authorised dealers lost their brands because they could not invest sufficiently to meet the never-ending demands of the manufacturers. Others have had to merge to survive in the competitive market. Yet others had to start importing used cars themselves.

Used-car importers have been forced to invest in showrooms and trained staff, and to offer warranties. And the consumer has not a shred of sympathy for either. He knows that the price in Malta is the result of government-imposed registration tax, transportation costs and economies of scale, for cars as it is for nearly everything else. But he also knows that he has a choice.

The importers are arguing that the government should forego millions of euros in registration tax in order to level the playing field.

They might be better off educating customers about cost structures and valuation lacunae, servicing requirements and warranties, emissions and fuel efficiencies, so that customers can weigh up the cost against the risks involved with getting a used car and make an informed decision. Because as it is, 41 per cent are making that choice.

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