Patrick Tse: President of the Macau | Motor Traders Association – ‘The parking fee raise harmed our business much more than any taxation’

Patrick Tse

The Legislative Assembly (AL) unanimously passed a bill that will see the increase of taxation for new vehicles purchased from 2016 onwards. The new measure follows another similar move taken by the government in October that resulted in an increase of the parking fees for eleven car parks, a policy decision which has been in force since December 1.
The intended purpose of the legislative measures was to decelerate the growth of the sale of private vehicles.  It has gained more effective control over the traffic; this is a concern expressed by many residents on several occasions. In an interview with the Times, Patrick Tse, President of the Macau Motor Traders Association, discussed the repercussions of the project on the car and motorcycle retail industry.

Macau Daily Times – For quite a long time, the government has been discussing measures such as the tax hike on the purchase of vehicles. In your opinion, did this implementation come in at the right time?
Patrick Tse  (PT) – Well, we know that the government, and in particular the Transport Bureau, have a specific objective: to control the sales of motor vehicles to a maximum rate of 4 percent growth per year. Currently, we have about 245,000 vehicles registered in Macau (about 110,000 cars and 135,000 motorcycles). In fact, if we view the statistics, we can see that in 2015 the sales figures have already slowed down to meet the government’s target of 4 percent, so I do not think this is really necessary at this moment.
If we look back on the last few years, we did experience yearly growth of more than 5.5 percent, but that is no longer happening. We also cannot blame all the traffic congestion on the increase of the number of vehicles; there are many other factors that should be considered.  Many of these factors are even related to the government construction works that have been taking place for a long time and are causing serious congestion. It is not fair to blame all of these problems on private vehicles. Even if our association members do not sell any vehicles, I doubt that the traffic would improve.

MDT – What other measures could local authorities implement to ease the traffic woes?
PT – There are many other things that the government can do to control the total volume of vehicles on the roads.  One of them is to begin removing the old vehicles from the roads – those which are more than 10 years old – that could be replaced with more environmentally friendly vehicles which omit less pollution and are safer in general. These vehicles constitute more than 50 percent of the total figure.
Ultimately, we have so many vehicles on the roads because we have a bad public transportation.  If we had a better public transportation system, people would not need to have so many private vehicles.
MDT – You previously mentioned that sales decreases are expected to occur as soon as the new taxation rules come into force. What is the feedback you have received from the retailers?
PT – It is not expected that the sales will stop immediately;
it is expected that sales will continue to gradually decrease.
In fact, until November 2015 we have already been registering a decrease in sales of about 16 percent year-on-year. For December, we expect that the results will lead to a year-­on-year decrease of about 20 percent. This is primarily affected by the general state of the economy in the territory, and the success of the gaming industry. It is affecting all businesses, and the vehicles sector is being heavily affected too. We can say as a general prediction that we will see a decrease of 10 percent for 2015 and expect a fall of 20 percent more for 2016.
MDT – Do you feel a retraction already on the consumers, or when do you expect that to happen?
PT – For the moment we can see in fact many of our members promoting the sale of their stock vehicles with appealing prices before the tax rises are to take place. I expect that after the measure will really come into force, we will have a very “cold period” in which there will probably be very few sales (near zero). This period should last about four to six months until consumers can adjust to these changes. After that I think we can go back to what is considered normal.

MDT – Do you think this new taxation will affect the motorcycles and the car retailers in the same way?
PT – I think the motorcycle retailers will not be affected very much by these changes.  The motorcycle market is a very different market that operates mostly by the needs of the consumers; people in Macau need motorcycles to commute to work or to school, etc. We also do not expect that the market will be much affected because the taxes, especially for the small motorcycles, are quite low, so the price difference will only range between one or two hundred, which is totally irrelevant. For that market, we are expecting only a decrease of around 5 percent for 2016.
Even for small cars, the difference in the total price should be within MOP10,000 and many of the retailers have already expressed their intention to not pass the price on to the consumer, assuming that expense on their own to avoid propagating the wrong message to the market.
The most affected market will be the mid-range market that  has had the most  sellable products in Macau in the last decade. A car that would have previously cost little above MOP400,000 with this new taxation will see its price escalate to around MOP450,000.  Although in percentage is not that different, it certainly carries a heavy psychological factor that will make consumers refrain from purchasing these products.
As for the high-end market, we do not expect any difference. For vehicles as is the case with all other consumer goods, luxury items usually are the ones that are better placed to survive crises.

MDT – So can we say that the parking fees are a bigger problem for this sector than the new taxation system?
PT – Definitely yes! They are going to ‘kill us’ with the car park fee raise! That’s why we are having such a big drop in the sales this year of private cars. The parking fees and the parking rental price raises harmed our business much more than any taxation. In the past, a person living on an average salary would be able to have a car and to be able to pay the parking and running costs of it with about one-third of their salary. Now it will need 45 to 50 percent of that same salary, all due to the car park prices that will no doubt rise. It was an arrow straight into our hearts.