Falling demand forces motor parts businesses to close down for good

TBS Infograph

Al Amin Mia folded his business of aftermarket car parts in the capital's Bangla Motor area a few months back, having failed to overcome losses in the series of lockdowns since the Covid outbreak last year.

He said his business had been running on a thin profit margin due to a tax hike and then the pandemic drove away customers. 

Moreover, his shop had remained closed for one-third of the working days owing to restrictions imposed to avert a spread of infections. After struggling to pay shop rents, wages and loan installments for more than a year, Al Amin decided to shutter the shop for good.

Middle class customers are barely replacing their car parts --be it engine or suspension parts or even tyres -- unless it is urgent. As private and commercial vehicles are running on the roads less than before, the need to replace parts has plummeted as well. 

Khorshed Alam, a motor parts merchant at Northbrook Hall Road in the capital, is looking for a new owner for his shop.

"I used to sell motor parts worth Tk40-50 lakh a month, which has come down to below Tk15 lakh. Business is down even when there is no lockdown," Alam said.

He will have to continue the business since he has not had any buyer for the shop. "But bank loan repayment has become an unbearable stress nowadays," Alam said.

More than 40 members of Bangladesh Motor Parts and Tyre Tube Merchants Association have already closed down their businesses, said its President Mohammad Mahmudur Rahman.

The market had been lucrative enough following improvement in road conditions. The domination of reconditioned cars in the transport sector had also pushed up the demand for new and reconditioned motor parts. 

In 2017, the government imposed a 5% value added tax on retailing of motor parts. Two years later, it increased the tariff value of imported automobile parts and tyres beyond the fair value in the international market.

Reconditioned cars started losing market share to brand new ones due to tariff adversity. At the same time, the price hike of spare parts made the repair of old cars less popular among the affluent class.

Across the country, there are at least 13,000 shops that sell new or reconditioned motor parts and tyres, according to the associations working with them.

The businesses created at least 2 lakh jobs, but the pandemic has caused at least 40% job cuts, association leaders said. Before the pandemic, the sector logged at least Tk20,000 crore in annual business.

"The government could have included this sector in the list for stimulus loans," Mahmudur Rahman said.

Only manufacturers have received low-cost loans under the government's massive stimulus packages of more than Tk1.27 lakh crore. 

Dholai Khal of South Dhaka is the biggest hub in the trade of used parts from accident-damaged vehicles in Japan and some other countries, and even from local cars.

Hikes in duties, taxes and freight charges have made used parts less affordable in the last five years.

Ehsan Uddin, a seller at the hub, said his monthly sales had dropped to Tk1.5 lakh from Tk7-8 lakh before the pandemic. He has two employees, down from five two years ago.

Bangladesh Reconditioned Engine and Motor Parts Merchants Association President Haji Mohammad Israfil told The Business Standard that shops had laid off more than one-third of their employees.

This association has also seen nearly 50 of its members leave the trade in the face of the pandemic.

Frustrated at not being eligible for subsidized loans, the association's General Secretary Yeasin Bhuiyan Bipu said, "We have investments, assets, and potentials to serve vehicle owners, but we badly need financial support during the crisis."