Jetcon to wholesale cars through Global Auto zone
GLOBAL AUTO Logistics Centre, the special economic zone operated by auto dealer Jetcon Corporation, launched into operation just over a week ago, and the company is already counting the savings from the elimination of wharfage fees that its new status allows.
Managing Director Andrew Jackson estimates that the 100 vehicles on the lot at Global Auto would normally have incurred around $1.2 million in wharf charges.
“When we import cars and they have to sit on the wharves there is a daily storage charge,” he said, while noting that a car kept on the wharves for two weeks incurs a charge in excess of $12,000; and even if the cars could have been cleared in a short period, Jetcon would still have to upfront $70,000 per vehicle to hold them in the bonded warehouse.
“This can get critical very quickly, affect our efficiency and erode our profit,” the auto trader said.
The in-bond charge is eventually recouped from the car buyer, but Jackson notes that there is an opportunity cost in tying up that cash flow.
“With the motor vehicle in the SEZ we can delay the paying of duties, such that the money can be used otherwise until it is closer to the time to deal with the customer,” Jackson said.
Cash flow is becoming more important to Jetcon, according to the auto dealer, who expects revenue growth to slow down.
“As we grow, we expect to see the rate of growth slowdown unless we do something radically different,” he said.
Revenue grew 18 per cent to $308 million in the first quarter ending March 2018, compared with 75 per cent in the first quarter ending March 2017. The growth for the quarter is in line with the increase in the December 2017 quarter, but lower than the September quarter at 24 per cent increase, and June 2017 quarter of 52 per cent.
In the March 2018 period, profit rose 21 per cent to $45 million or 7.6 cents per share, from $37 million or 6.3 cents per share for the March 2017 quarter.
Notwithstanding Jetcon’s positive performance, Jackson says it’s time to change strategy. Through Global Auto, he will operate as a wholesaler of motor vehicles to other dealers and re-exporter to other Caribbean countries.
“What we’re doing now is
literally changing gears by a modification of the whole business model from which we expect to get significant growth,” Jackson said.
Noting that the Jetcon SEZ operation is “like bringing Japan to Jamaica”, Jackson said he was pitching the service to smaller players in the used-car business, but would not rush into business arrangements before outfitting the zone to service clientele.
“There will be no need to order and wait for two, three months for the motor vehicle to arrive if the one that they want is already here. The beautiful thing about it is that they can clear it using their own licence,” Jackson said.
Over the next two months, Jetcon will be hiring additional staff at the SEZ facility. As to Global Auto’s structure within the group, consideration is being given to have the facility become a subsidiary of Jetcon, with its own staffing, operations and revenues.
“That is a direction in which we’re looking. We may just do that since it seems to be the cleanest way,” Jackson said.
The 100 vehicles at the location represent a sixth of the total capacity available to Jetcon. Jackson says getting to the 600 limit won’t happen right away, but that he wants to put at least a third of the capacity into operation for now.
“It will take a while, say a few months, to do that. It depends on how we see the market operating, but in the short term we will probably get up to about 200 to 250. That will allow us to keep fewer cars at our (main) location,” he said.