Import of reconditioned cars fell 46 percent year-on-year to 12,502 units in 2018-19 because of higher duties, a fall in price depreciation, currency devaluation and increasing popularity of hybrid models.
Similarly, the sales of reconditioned cars went down by 16.43 percent year-on-year to 61 units per day in the last fiscal year.
The government brought down the maximum depreciation of imported reconditioned vehicles to 35 percent in 2018-19 from 45 percent in 2015-16, increasing the import duty and the price of car, said Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).
Importers enjoy a maximum 35 percent depreciation on the brand new price for four-year old cars but it was 45 percent just three years ago. There is no depreciation for a one-year old car, Haque said.
He said the price difference between reconditioned and brand new cars is very insignificant because of the reduction in depreciation.
Under these circumstance, importers have become cautious in importing reconditioned cars, said Haque, also the owner of Haq’s Bay Automobiles Ltd.
The imports of reconditioned cars fell because of an increase in customs duty, liquidity crisis in the banking sector and higher lending rates, said Mohammed Shahidul Islam, chairman of HNS Group and general secretary of the Barvida.
The interest on car loans stood at less than 10 percent three years ago but it rose to 11.50 percent for service-holders and 12.50 percent for businesspeople, according to bankers.
Islam said banks provide limited loan facility due to the liquidity crisis. At present, customers can avail around 50 percent of the cost of a car as loans from banks, but it should be 80 percent, he said.
The devaluation of the taka also played a part in bringing down the import of the used cars.
The exchange rate of the taka was Tk 84.5 per US dollar on June 30 this year, the last day of the last fiscal year, up from Tk 83.7 on June 29 in 2018, Bangladesh Bank data showed. It was Tk 80.59 in June 2017.
On the other hand, the overall economy is yet to return to normalcy to the full after the general elections, Islam said.
“On this backdrop, importers have brought down the import of cars. They are passing dull seasons,’’ he said.
Traders have to pay 31 percent to 826 percent in import duty depending on the CC (cubic centimeters) of cars, apart from 15 percent VAT, 5 percent advance tax, 5 percent regulatory tax, and 4 percent advance trade VAT on tariff value.
Mannan Chowdhury Khoshru, a former president of the Barvida, said around 100 importers quit the car business due to continuous losses in the last two years. Currently, around 300 importers bring cars from japan.
People are also gradually shifting from non-hybrid cars to hybrid ones, dealing a blow to the reconditioned car business.
Around 30 percent of the total imported cars are hybrid, Khoshru said, adding that 100 percent cars would be hybrid by the next three to four years.