Reconditioned vehicle import rises defying inflation, dollar crisis

Import and sale of reconditioned vehicles have increased in Bangladesh at a time when the country is suffering from high inflationary pressure and foreign currency crisis.

Businesses imported 19,803 reconditioned vehicles in fiscal year 2022-23, which grew 8.6 percent year-on-year to 21,519 units in fiscal year 2023-24, according to the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).

Importers mainly bring in reconditioned sedans, microbuses and sport utility vehicles to Bangladesh from Japan.

Sales and import of such vehicles have been low during the election years between 2014 and 2018 but the sector started showing an upward trend in fiscal year 2022-23.

Bangladesh Road Transport Authority (BRTA) also saw a 16.5 percent year-on-year rise in the number of vehicles being registered last fiscal year.

Some 2,294 vehicles got registered every month in the six months to June 2024 whereas the monthly average was hovering around 1,968 in 2023, according to the BRTA data.

All these took place in Bangladesh when annual inflation rose to a 12-year high of 9.73 percent last fiscal year, the highest since fiscal year 2011-12, according to the Bangladesh Bureau of Statistics.

The import of cars increased slightly last fiscal year although it was mandatory to keep a 100 percent margin for opening letters of credit, said Mohammed Shahidul Islam, secretary general of Barvida.

"It is interesting to see such a rise in demand and import of these vehicles amid ongoing economic crisis and high inflationary pressure," he said.

Even, the prices of imported cars have also increased by around 30-35 percent depending on the model and engine capacity due to the appreciation of the greenback against the Bangladeshi currency in the last two years, he said.

Islam said the demand for cars increased because of the absence of a standard public transport facility in urban areas.

The government did not increase import duty on used vehicle import in the last two national budgets, which might have also played a vital role in fuelling the number of such cars in Bangladesh, said Md Habib Ullah Dawn, president of Barvida.

The duty on imported reconditioned cars has been hovering between 132 percent and 500 percent depending on their capacity in the last two years.

According to Mohammed Shahidul Islam, Dhaka city alone needs at least 4,000 buses to replace the unfit ones that are currently running in the city.

The government earned Tk 4,114.61 crore in import duties from the reconditioned car sellers last fiscal year, which was Tk 3,816.92 crore in the previous year, Islam said.

The ongoing inflation and economic crisis did not hit the rich and affluent class and that is why the demand for luxury items like cars remained the same, said Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem).

Moreover, high inflation is a blessing for a section of people of the society, particularly the businesspeople, as it creates a scope for them to earn quick bucks, he said.

The rise in demand for such high-priced items also made it crystal clear that corruption is going on in full swing, Raihan said.

People are purchasing cars at any cost by taking auto loans from banks to ensure safe travels for their family members, said the Barvida president.

People are even putting highest priority on vehicles instead of buying an apartment as they consider cars are safer than public transport at present, he said.

According to him, the demand for reconditioned and new cars will increase in the future as the purchasing power of a section people are increasing in the country although the people with fixed income are facing difficulties in fighting the inflation.