Car sellers see better business as banks roll out more loans

The car market anticipates a pick-up in sales as the central bank has doubled the ceiling for auto loans.

Buyers will get more loans from financial institutions, said Khaan M Sakib Us Salehin, head of marketing for Rancon Motors, an automotive division of Rangs Group.

The group markets Mercedes-Benz and Mitsubishi cars in Bangladesh.

The debt-equity ratio has recently been changed to 50:50 from 30:70 earlier, allowing banks to finance half of the price of a car.

Banks now can give up to Tk 40 lakh in car loans, which was Tk 20 lakh earlier, Salehin said.

In other words, consumers can now buy cars worth up to Tk 80 lakh by availing Tk 40 lakh as bank loan.

Prices of sedan cars hover around Tk 35 lakh while luxury cars assembled in Bangladesh can cost up to Tk 80 lakh.

Sales of reconditioned cars—mainly Japanese Toyota that has a 80 percent market share in Bangladesh—will increase with the help of increased limits of car loans, said Md Habib Ullah Dawn, president of Bangladesh Reconditioned Vehicles Importers and Dealers Association.

Bangladesh Bank has increased the debt ratio after a long bargain with the BARVIDA, said Dawn, also the owner of Auto Museum Ltd and a director of Exim Bank. 

“We saw a sluggish trend in sales last year due to political instability. The new BB move will help importers recover some loss they suffered last year.”

Anwar Hossain, managing director of Car House Ltd, also sees a hike in sales of reconditioned cars, the likes of vehicles his firm imports. “Mid-level officials can now easily buy cars,” he said.

Hossain called for lowering the import duty of reconditioned cars to help decrease such kind of vehicle's prices.

High import duty discourages people from buying cars, he said, adding that: “The government should reduce such tax to help more people use cars.”

At present, the duty structure is split into five categories according to the size of engines, and there is a huge jump in duty for cars upwards of 1,500cc.

For import of reconditioned cars up to 1,500cc, the duty is 132 percent, which rises to 218 percent for cars in the 1,501cc-2,000cc range and 373 percent for cars between 2,001cc and 2,750cc.

Importers are paying 542 percent duty for cars in the 2,751cc-4,000cc range and 608 percent for cars over 4,000cc. The price of reconditioned cars will fall if the government revises the duty structure, said Dawn of BARVIDA.

He expects the prices of vehicles to drop by Tk 2-3 lakh each if the government revises the categories and gives reconditioned hybrid cars the same duty benefits as the new ones.

“A car is no longer a luxury. It is turning into an essential item as the economy is growing fast,” said Muhammed Ali, managing director of United Commercial Bank. “It is a good move to increase the loan limit.”

The government should focus on infrastructure to accommodate more cars on streets, he said.

gazitowhid@thedailystar.net