Reconditioned car imports, sales decline

Both imports and sales of reconditioned cars declined due to price increases stemming from the increase in the price of US dollars and the prevailing macroeconomic vulnerability, according to market insiders and market data.

However, the market for brand-new cars fared slightly better, achieving steady growth despite falling sales.

According to the data from the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida), imports of reconditioned cars dropped 10 percent during the July to September period of the current fiscal year compared to the same period last year.

The data shows that 5,995 units of private passenger cars were imported during the first quarter of the current fiscal year. That figure stood at 6,601 units in the last fiscal year.

The BRTA data also illustrates that private car registration declined by 36 percent compared to last year.

892 private passenger cars were registered with the Bangladesh Road Transport Authority (BRTA) per month this year compared to 1,391 per month last year.

"Despite the vulnerable macroeconomic situation, at least the government is allowing us to import cars so we can continue business. But on top of everything else, we have to provide 100 percent margin," said Mohammad Shahidul Islam, chairman of HNS group.

He added that although business was slow, importers would brave the lean patch by making nominal profits or attempting to break even.

He believed the automobile business is dependent on forex reserves and a stable economy, urging the government to form a taskforce to ensure entrance of remittance through formal channels and introduce better incentives for remitters.

Shahidul, also secretary general of Barvida, said only one-third of remittances entered Bangladesh through formal channels, which fuelled the dollar crisis and ultimately impacted the automobile business.

A major reconditioned car importer and dealer, on condition of anonymity, told The Daily Star he felt besieged by trouble given slow sales and difficulties opening letters of credit (LCs).

Cars are luxuries, so they are related to the growth of the economy and stable economic situation, he said.

He added that if the situation persists for the next year, some dealers would be compelled to shut up shop.

Abdul Haque, managing director of Haq's Bay Automobiles Ltd, reiterated that imports declined due to the dollar crisis, saying prices of cars increased due to the devaluation of the taka against the greenback.

At the same time, the impact of the dollar's price hike was also felt in import duties, causing prices to increase.

According to Haque, the import duty for a high-end reconditioned car like a Land Cruiser or Pajero is more than Tk 1 crore.

Duties on mid-level and low-end cars have also increased, putting them beyond the reach of the middle class.

Haque, also former president of Barvida, suggested adjusting duties in order to reduce prices, increase sales and boost government revenue from this sector.

A senior official of Uttara Motors, the sole distributor of Suzuki cars in Bangladesh, said although the sales of reconditioned cars were in decline, demand for brand new cars was increasing as they offer warranty and better value for money.

"People are getting brand new cars at the price of reconditioned cars. It can even be cheaper than a reconditioned car since customers don't need a fitness certificate for the first five years," he said.

According to him, the market share of reconditioned cars had grown from 10 percent to 18 percent in the past five years.

He added that they were thinking of setting up an assembling plant in Bangladesh for popular models offered by Suzuki to provide cars at reasonable prices and in a short time in order to increase market share.

South Korean automotive manufacturer Hyundai and Malaysia's Proton have already invested in such initiatives alongside local companies such as Runner Group and Bangladesh Auto Industries Ltd.

Investments from at least six other manufacturers in four-wheeler manufacturing, including South Korea's Kia, are in the pipeline.