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Distributors rue parallel import advantage
WITH the certificate of entitlement (COE) quota expanding steadily and replacement buyers fuelling demand for parallel imports (PIs), some authorised distributors' complaints about an uneven playing field are growing louder.
Grey imports are cars that are not offered by authorised distributors. During the lean COE years of 2011-2014, the parallel industry switched from mainstream brands such as Toyota and Honda to focus instead on luxury makes such as Mercedes-Benz, BMW, Porsche and even Bentley.
In good times, parallel importers cornered nearly one-quarter of the new car market. But when the COE supply shrank, market share fell to as low as 5.2 per cent in 2013.
Today, parallel importers are enjoying a reversal of fortunes with a booming new car market. Last year, their market share bounced back to 6.7 per cent and in the first quarter of 2015, it rose to 11.3 per cent.
The three brands most affected by PIs so far are Toyota, Honda and Mercedes-Benz. In the overall market, Toyota is Singapore's No 1 brand and in Q1 2015, PIs made up 580 of the 2,090 new Toyota cars registered. Honda was next with 432, followed by Mercedes-Benz with 103.
The top PI model in Q1 was the Honda Vezel compact SUV, the domestic Japanese version of the HR-V sold by authorised Honda distributor Kah Motor.
The second most popular PI model in Q1 was the Toyota Harrier mid-sized SUV. The Harrier is similar to the Toyota RAV4 offered by authorised Toyota distributor Borneo Motors Singapore (BMS). Rounding up the PI top three is the Toyota Estima mid-size MPV, the domestic version of BMS's Previa.
Mazda, which has not been affected by parallel imports recently, is back in the PIs' crosshairs. The Mazda3, which was Singapore's second most popular model in Q1 2015, is now available as a grey import.
The main reason for a PI car's popularity is that it is generally cheaper than a similar model from an authorised distributor because of the PI car's lower OMV or open market value, resulting in lower registration taxes.
Apart from having to contend with lower OMVs among PIs, authorised distributors are also unhappy with what they perceive as double standards. One is the regulatory requirement for all cars in the showroom to display the Fels (fuel economy labelling scheme) label prominently on the windscreen.
"Many new cars in various PI dealers' premises do not have this label," said a BMS spokesman. "Yet official distributors are often subject to spot checks by government agencies and given warnings should we fail to comply."
Another bugbear for authorised distributors is the fixed Evolution Coefficient (EC) of 0.92 for carbon emission values enjoyed by parallel imported cars. Applying this EC lowers the carbon emission figure, thus netting a higher CEVS (Carbon Emissions-based Vehicle Scheme) rebate or lower CEVS surcharge.
The use of this fixed EC - for cars that have not been run in - also allows the batch approval application for five identical cars in the same bill of lading.
The BMS spokesman said: "This means parallel importers not only qualify for lower carbon emissions but they also get to save time and money."
Nicholas Wong, general manager of Honda distributor Kah Motor, accepts that Singapore is a free market but questions why the government is allowing grey importers "to take a different route" from authorised agents when it comes to the importation of cars.
"There is nothing wrong if individual buyers use these open market policies to self-import cars, but not if someone is going to make a business out of it," said Mr Wong.
But one industry source said that authorised agents have to accept that the parallel import industry is here to stay. "Parallel importers are like flies - they will always be around," he said. "The only thing you can do is to reduce their market share and to do that, the rules have to be changed."