Uncertainty halts recovery of car sales | The Daily Star
12:00 AM, November 22, 2020 / LAST MODIFIED: 06:23 PM, November 22, 2020

Uncertainty halts recovery of car sales

Bangladesh's automobile industry has fallen into deep uncertainty as sales declined by 40 per cent this year due to the ongoing coronavirus pandemic.

Besides, banks seem uninterested to provide auto-loans amid the current crisis.

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Car sales came down to 900 units per month across the country while it was around 1,500 per month last year, according to Abdul Haque, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).

"This means our sale volume fell by about 40 per cent compared to normal times," he said.

Customers are worried about a potential second wave of infections and do not want to spend money on costly items, Haque added.

Car sales had increased in August and September, and it suddenly slowed again in October due to the threat of a potential second wave, said Mohammed Shahidul Islam, secretary-general of the Barvida, and chairman of HNS Group.

"The market is now quite unpredictable amid the current situation," Islam said.

As per a rough estimate by the Barvida, the average number of cars sold across the country is currently 36 units per day, while it was 61 units in 2019.

This 40 per cent decline in sales has only worsened the troubles for the automobile importers and distributors, Barvida officials said.

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

Nippon Autos sold at least 200 units in 2019 and may sell jut 50 units this year, a 75 per cent slide, due to the coronavirus impact.

Khasru said that he has already had to close two of his three showrooms in Dhaka.

Farzana Khan, deputy director for sales at Hyundai Motors Bangladesh, said her company's sales had slightly improved following the nationwide general holiday aimed at curbing the spread of the Covid-19.

However, the business, in general, has dropped by around 50 per cent. The company sold around 70 units per month in 2019, and the number has come down to 35 to 40 units per day this year.

"People are avoiding big purchases due to their declining incomes. They are uninterested in spending money on non-essential items at the moment," Khan said.

Besides, banks and non-banking financial institutions (NBFIs) are comparatively more conservative than before when it comes to approving auto loans.

"Banks and NBFIs are not interested in approving auto loans for anyone other than salaried individuals," Khan said.

A senior official of Pubali Bank also acknowledged that banks are slightly cautious in case of approving auto-loans. Before approving a loan, lenders need to think about the increased risk.   

However, IPDC Finance has been flexible about approving auto loans as the Bangladesh Bank has relaxed rules on auto-loan disbursements from NBFIs, said Md Nurul Islam, head of the auto and personal loan department at the NBFI.

In some cases, IPDC Finance provides 100 per cent loan against the price of a passenger car based on the vehicle's condition and brand.

However, the NBFI is cautious in disbursing auto-loans to the applicants involved in risky businesses, Islam said. IPDC disbursed around Tk 20 crore in auto-loans in October.

According to Haque, not one member of the Barvida has received funding from the government's stimulus packages as of yet.

In June, reconditioned vehicle traders demanded Tk 500 crore from the package for industries and service sectors to cope with the economic fallout caused by the Covid-19.

The Barvida has more than 870 members that pay their income taxes, and these members have already invested around Tk 20,000 crore in the sector over the past 30 years, Haque said.

Khasru went on to say that importers have to pay Tk 800 per day to the Chattogram Port Authority as a rent for each unit of the car stored.

Importers were not exempt of this payment, which excludes customs duty, even during the two-month nationwide shutdown, he added.

There are around 6,000 vehicles stranded at the Mongla and Chattogram ports as importers have been unable to have them released amid the cash crunch brought on by the lower sales and a lack of funding from the stimulus packages.

The sales of both used and branded cars have reduced significantly by the Covid-19 fallout, Khasru said.


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