Reconditioned car trade loses Tk1,500cr to pandemic

The coronavirus pandemic dealt a massive blow to the Japanese reconditioned car sale business, with the sector incurring losses of around Tk1,500crore in the last 14 months. 

Import and sale of such cars dropped by almost 40% since the health crisis began. 

Traders in this Tk20,000crore sector did not get any stimulus support from the government. Many left the business as they could not pay showroom and office rents, workers' wages, and bank loans.

They now demand that the high duty be reduced a little, the import duties on new and reconditioned vehicles be made equal, and the three-month rent they had to pay when cars remained stuck in port due to the lockdown be refunded. 

Besides, they demand that the deadline for repaying bank loans be extended further and financial assistance be provided by the government. 

Otherwise, it will be very difficult to recoup losses, they say. 

Matiur Rahman, who has showrooms in Dhaka and Gazipur, used to sell about 30-35 cars a month, with a monthly turnover of Tk6-7 crore, before the pandemic. Now he sells eight to 10 cars a month, and the monthly turnover is less than Tk1 crore.

He said the number of reconditioned car buyers had fallen drastically for several reasons. 

"The middle class people are the main customers and they do not have money now. Reconditioned car prices have risen in the global market as well because of the pandemic. People are no longer interested in buying such cars," he said. 

Requesting anonymity, another trader, who had been importing reconditioned Toyota cars from Japan since 1997, said his business had been down for the past few years while the pandemic had aggravated the situation.        

He said business remained closed for nearly three months last year and also for about a month this year. 

"I almost had no sales during Covid-19. I was forced to close my business as I could not recover losses that reached Tk1 crore."

He was also sued by banks as he could not repay loans. He is now on bail. 

The Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida) says there are about 200 reconditioned car showrooms and more than 300 importers in the country. Investment in this sector is about Tk20,000crore. 

The country has an annual demand for 15,000 cars and reconditioned vehicles meet 85% of that. 95% of reconditioned vehicles are imported from Japan. About 1 lakh people used to work in this sector and the pandemic ate up 50% of the jobs.

Barvida says 23,000 reconditioned vehicles were imported in the 2017-18 financial year while imports almost halved next year. 

In the last fiscal year, imports came down to less than 10,000 units while less than 4,000 vehicles were imported from July to December last year.

The National Board of Revenue's (NBR) duty collection also halved as imports fell. Sources said the NBR realised Tk2,649crore in revenue from this sector in the 2017-18 financial year. 

The amount went down to Tk1,450crore the following year. In the last financial year, Tk1,200crore was realised.

Barvida General Secretary Shahidul Islam said sales had increased slightly in January this year but had fallen again due to the second-wave lockdown. 

The present situation is still the same, he said. 

He said about 95% of traders in this sector have bank loans. 

Showrooms across the country remained closed in the lockdown, with about 50% of their employees losing jobs while about 10-15% of showrooms had faced closure, he said.  

The government had not responded to the request for a Tk1,000crore loan assistance package made during the early period of the pandemic, he said. 

He further said cars had remained stuck in port for three months during the lockdown and the government had forced importers to pay port rents for those months, though this had been waived in many countries. 

Barvida President Abdul Haque said the demand for reconditioned vehicles had fallen sharply in recent years due to not only Covid-19 but also disparities in duties on reconditioned and new cars. 

He said reconditioned car duties had jumped much compared to that on new ones in some cases because of the valuation process while traders in this sector were facing massive losses. 

Old car import is the second highest source of revenue in the country, he said.  

"At present, old car import is subject to 128-827% duty. Nowhere else is this duty so high."

Policy Research Institute Executive Director Dr Ahsan H Mansur told The Business Standard this business had incurred big losses during the pandemic and there was a risk of further losses in the coming days. 

"The government is not giving this sector any stimulus, saying these entrepreneurs are just sellers and are not directly involved in production. But using this logic to not offer them any incentive during this global health crisis is not appropriate," he said. 

He said these entrepreneurs are earning the government revenues and the latter should bring them under stimulus support like other sectors. 

Otherwise, this sector would see further losses, he added. 

Small and Medium Enterprise Foundation Managing Director MdMafizur Rahman told The Business Standard many reconditioned car dealers had sought incentives, but their requests could not be entertained as they are not directly involved in production, which is a requirement in the government provision. 

Meanwhile, the government has decided to auction 155 reconditioned vehicles stuck in port for a long time. But Barvida has sought seven more months, until December, considering losses and market stability during the pandemic.