Soaring dollar, costs squeeze Jashore auto parts businesses

A confluence of factors, such as a surging dollar value, double-digit loan rates, inflation, and operational cost hikes threaten the survival of motor parts businesses in Jashore.

Jashore has become a hub for automotive parts, catering to renowned transport companies. The district's light engineering industry now meets a significant portion of the country's motor parts demand.

Traders have said that the rise in the dollar exchange rate over the past two years, approximately 45%, has elevated import costs, leading to higher product prices and a reduction in consumer purchases.

They said soaring inflation and interest rates have squeezed profit margins for the past two years and their ability to stay afloat is under severe strain.

Mizanur Rahman Khan, former president of the Jashore Chamber of Commerce and Industry, told TBS, "The surge in the dollar exchange rate has severely impacted auto parts importers, forcing many traders to default on loans and lay off workers."

He said in 2022, the dollar was priced at Tk85-86, while the current rate set by the Bangladesh Bank stands at Tk117. However, importers are purchasing dollars at Tk123-125, leading to heightened costs for importing raw materials or products. Consequently, business competitiveness is on the decline.

Khan underscored the urgent need for business cost reduction to ensure future survival, suggesting that the government take proactive steps in this regard.

The issue of rising business costs in Bangladesh has also cropped up in several recent studies. 

The Business Initiative Leading Development's annual business confidence survey report, for instance, found an increase in overall entrepreneurial confidence last year. However, it also noted concerns regarding rising costs of raw materials, utilities, rent, and equipment. If this trend persists, it could significantly dampen business sentiment in the coming days.

Shahinur Hossain Thandu, president of the Jashore branch of the Bangladesh Motor Parts and Tyre-tube Traders Association, said, "There are approximately 2000 motor parts and motorcycle parts shops in the district, with a collective investment of at least Tk10,000 crore, a significant portion of which comprises bank loans."

"These 2000 shops employ about 20,000 individuals, with salaries ranging from Tk7,000 to Tk15,000," he continued.

"Traders have been facing hurdles in conducting business due to difficulties with opening import letters of credit (LCs) for the last two years. Even big traders are experiencing a downturn. Meanwhile, small and medium traders, as well as their employees, are worried about the future of their businesses now," Shahinur added.

The owner and importer of Faria Motors on the Jessore-Khulna highway, Rezwan Ahmed Murad, said, "For two years during the pandemic, there was no business. Since then, I have been struggling to survive, paying employees from the working capital."

"I cannot import products as per demand due to LC constraints. The rising dollar exchange rate has escalated our import costs, dissuading buyers from purchasing goods unless absolutely necessary. Overall, the business outlook is grim," he added.

Ejaz Uddin Tipu, chairman of Ripon Autos Pvt Ltd, a prominent importer of motorcycle parts, said, "The dollar exchange rate continues to climb, and we usually cannot buy the greenback at the government-set prices. Unfortunately, buyers are not interested in hearing about the burden we have to bear due to the dollar rate hike."

As a result, there is a notable slowdown across the auto parts sector, particularly impacting small traders who are struggling to stay afloat, Ejaz said.

The majority of revenue generated by Benapole Customs is derived from high-duty car parts and motor parts imports. 

However, revenue collection has declined in the first 10 months of the current fiscal year due to lower import of motor parts, said Shamsur Rahman, president of Benapole C&F Agents Association.

Benapole Customs House Joint Commissioner Md Shafayet Hossain also confirmed the dwindling revenue generation from motor parts imports.