Pandemic wreaks havoc on car sales

Passenger vehicle sales fell by around 26 per cent in 2020 compared to the previous year due to the ongoing coronavirus pandemic and imposition of additional road tax.

Passenger car sales were at its lowest in the past seven years as a total of 12,403 units were sold in 2020 while it was 14,681 units in 2014.

Sales started rising in 2014 and continued to increase until 2019, according to data from the Bangladesh Road Transport Authority (BRTA).

However, the Covid-19 fallout and imposition of additional road tax negatively affected the industry, market players said. The government decided to increase advanced income tax, commonly known as road tax, by 67 per cent for the current fiscal year.

The amount must be paid when seeking the registration and fitness renewal for private motor vehicles.

Until the last fiscal, the owners of cars or jeeps with up to 1,500cc engine capacity had to pay Tk 15,000 as road tax while those with up to 2,000cc engine capacity paid Tk 30,000.

The rates of taxes for these vehicles increased to Tk 25,000 and Tk 50,000 respectively in the current fiscal.

Meanwhile, a car or jeep with an engine capacity of 2,000-2,500cc now has to pay 50 per cent more at Tk 75,000.

Similar vehicles with an engine capacity of 2,500-3,500cc will have to pay 25 percent more.

"Car importers passed a terrible year in 2020 due to the economic impact of Covid-19 even though sales were slightly improved," said Mohammed Shahidul Islam, secretary-general of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida) and chairman of HNS Group.

Besides, since car prices increased in Japan at the same time, it will have an impact on the local market in the coming days.

"So, we will demand to the government to restructure the customs duty to help the business survive," Islam said, adding that the market is still unpredictable amid the current crisis.

Car sales came down to 1,033 units per month across the country in 2020 while it was around 1,398 per month the previous year, according to Abdul Haque, president of the Barvida.

"This means our sales volume fell by about 26 per cent compared to normal times," he said.

Customers avoided spending on costly items amid the ongoing economic uncertainty and cars were no exception.

Besides, the additional road tax also affected the market, Haque added. 

According to the Barvida chief, importers are in deep trouble as sales have decreased drastically due to the faulty tax structure and reduction in depreciation rate.

Haque went on to say that the faulty duty structure for reconditioned cars has been set in a way that pushes the price for reconditioned cars above that of new ones.

He also alleged that the duty structure is creating disparities between reconditioned and brand-new car importers.

Car sales have come down to 41 units per day in 2020 while it was 56 units in 2019 and 61 units in 2018.

The government brought down the maximum depreciation on imported reconditioned vehicles from 45 per cent in fiscal 2015-16 to 35 per cent in 2018-19.

This increased the import duty and price of imported cars, Haque said, adding that there is no depreciation for one-year-old cars.

As a result of the reduced depreciation rate, the price difference between reconditioned and brand-new cars is very insignificant.

"Under these circumstances, all importers and dealers face challenges to survive," Haque said.

Mannan Chowdhury Khasru, a former president of Barvida and owner of Nippon Autos Trading, said he had not witnessed such a loss throughout his four-decade-long career in the sector.

Khasru also believes that car sales came down to its lowest in the last seven years due to the Covid-19 fallout and additional road tax.

Besides, car prices in Japan increased as the Japanese currency gained strength against the US dollar.

"There is no scope to manipulate the price as customs charges import duty on the price of the yellow book," he said.

Khasru added that he already had to close two of his three showrooms in Dhaka due to continuous losses in 2020.