Car sales stuck in slow lane
Car importers and retailers in Bangladesh are in a tight spot as they are finding it difficult to keep businesses running because of the plunge in sales caused by the second wave of coronavirus infections.
With no income for the last four months, they are worried that they might not be able to pay salaries to staff, clear rents of showrooms, and repay bank loans.
Car sales have averaged 1,239 units per month so far this year, down from 1,339 units in 2020, according to the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida) and the Bangladesh Road Transport Authority (BRTA).
The closure of the BRTA since May owing to lockdowns has aggravated the revenue situation for importers, distributors and retailers, as they have not been able to complete the registration of the cars sold before the second wave.
Banks in Bangladesh will not disburse loans secured against cars until they are registered with the BRTA.
Passenger car sales plunged to a six-year low of 12,403 units in 2020 as demand collapsed owing to the economic slowdown caused by the pandemic.
Sales had improved in January and February in keeping with the rebound in the economy and consumer confidence. But the second wave erased the gains.
"We had thought 2021 would be better than 2020, but the second wave has put us in a terrible situation," said Mohammed Shahidul Islam, secretary-general of Barvida and chairman of HNS Group.
Islam said the BRTA had allowed car registration only for three days since June.
"As there is no income, car distributors and importers are facing trouble in paying the installment of bank loans," he noted.
Arif Khan, the proprietor of Trade Stone International, a reconditioned car importer, said sales have declined around 70 per cent this year.
"Besides, we have not been able to complete the registration of the cars sold before the second wave," he said.
There are around 400 units of cars awaiting BRTA registration, and the payment against them has been stuck in banks.
In Bangladesh, purchasing cars is mostly bank-financed. Banks do not disburse money before the completion of registration.
There were more than 6,000 units of cars waiting to be released at Chattogram and Mongla ports.
Khan said banks and customs were open, but the BRTA had been closed for a long time. "So, traders can't access the cash from the sales of the cars due to the absence of registration."
Md Mahbub-E-Rabbani, director for road safety at the BRTA, said registration would open just after the withdrawal of lockdowns.
The government is easing lockdown restrictions from tomorrow.
Sajeda Akter Maya, owner of Car Fair, a retailer, said car sales had declined drastically since the start of the pandemic. "Now, it has become tough to continue the business."
Before Covid-19, she would sell 12 to 15 cars per month. It has now come down to four to five units per month.
"The income is not enough to pay salaries to staff and clear rents of the showroom."
"I am not the only retailer who is facing the situation. The scenario is the same for all car traders in the country."
Maya needs Tk 250,000 every month to pay staff salary, rent and utility bills.
"We are not thinking about profit and loss at the moment. Instead, our focus is on how to survive business," said Saiful Islam Samrat, vice-president of Barvida.
If the BRTA opened its office for registration, the government would get revenue and tax as well, he said.
Meanwhile, Barvida has demanded the withdrawal of the supplementary duty on microbuses.
Petrol-powered microbuses with a seating capacity of 10 to 15 passengers are the most imported item and used as public transport. After importing, they are converted into CNG or LPG-run vehicles to cut the cost of fuel.
Therefore, if the government reduces supplementary duty as per the finance minister's budget speech, passengers will receive the benefit directly, the association said.
Considering the proposal of Barvida, the government cut tariffs and exempted the imports of diesel-run microbuses from paying supplementary duties for 2021-2022.
They still have to face a 25 per cent import duty.
The National Board of Revenue should extend the SD exemption facility to petrol-run microbuses, which are widely used in Bangladesh compared to those run by diesel, Barvida said.
HNS Group's Islam demanded the waiver of loan interest and postponement of the installment payment to at least December 2022 to help them recover the losses.
Islam also called for the waiver of port rents as they could not release the cars because of the capital crunch.