The Puerto Rico Association of Automobile Distributors and Dealers released the findings of a study Wednesday that reflected, among other data, that used car sales has been on the rise in the past decade, outpacing new vehicle movement.
According to the trade group known as PRADA for its initials in Spanish, in 2005, new and used car sales reached 140,400 units, representing $3.3 billion in sales. Citing the same Planning Board data, the group noted that last year new car sales totaled 81,357, with sales reaching $3.45 billion — attributing the difference to greater activity on the used car sales side.
The drop in new car sales is affecting tax collections for the government, said Eduardo González-Green, chairman of the PRADA committee that developed the methodology and oversaw the study. The committee sent out questionnaires to 103 auto dealerships, of which 36 responded. The study participants represent total sales of $1.4 billion, or 40 percent of the market, PRADA said.
“We’re pleased with the support received from our dealers to be able to have the data first hand and perform for the first time, such a comprehensive study of the automotive industry on the island,” said Pedro Luis Benítez, president of PRADA.
“With the results of the study we’re able to have a clear framework about this important economic sector, such as direct jobs generated, salary levels, the contributions that we make to the government in taxes, patents and permits, among many other important factors, “said Benítez.
Declining new car sales could be offset with government incentives, specifically from the Treasury Department, González-Green said.
“If the government incentivized the industry, it would result in more money for Treasury, which would collect more taxes, which is why we urge the government to become our ally and not the opposite,” he said.
Meanwhile, data from the study shows that a dealer in the U.S. mainland reported higher sales than Puerto Rico, at $52.1 billion and $38.3 billion, respectively.
Dealers in Puerto Rico reported a net profit before tax of only 0.95 percent, while in the U.S. mainland, that figure fluctuates between 1.9 percent and 2.2 percent, the study showed.
The study also reflected the general feelings of participants, who confirmed the factors that mostly affect their operations, including new tax laws, shortage of inventory, problems with registration of vehicles and increases in overall costs.
As part of the study, the committee presented a scenario that represents the net income (after taxes) of a selling price. For example, a vehicle priced at $26,825 yields a net profit of $170.93 for the dealer, while the Puerto Rico government and its agencies collect $4,389.30 from the sale price.
“This is an important indicator as it reflects the reality of our industry, in which the state with its overwhelming intervention, taxes, regulations, licenses and permits takes the biggest slice at 16 percent of the sale price and the dealer that carries all the risks and investment only takes 0.64 percent of the sale,” González-Green said.
Puerto Rico’s auto dealership industry represents an investment of some $500 million. The average dealer employs about 76 people — nine more than the stateside average — paying an average salary of $39,000, versus the $86,341 stateside average, the study showed.
“There are many and very well-identified pitfalls we face every day to push our industry forward and continue to contribute to the island,” PRADA Vice President Charlie Vaillant said.
“From now on we ask for the government’s helping hand to strengthen the industry and so we remain committed to our people,” Vaillant said.