Can Bangladesh’s luxury car market shift gears for a comeback?

Once a bustling scene of customers eager to explore and choose their desired vehicles, the showrooms now spend most days idle, cleaning and preparing cars in the hope that a customer will eventually walk in. 

"You know business is slow when the phone stops ringing like it used to," said Arif Khan, managing director of Motors Bay, a showroom in Tejgaon overlooking Hatirjheel. Like him, almost all showroom owners are worried that the sales have dropped to near zero.

The luxury car market in Bangladesh, once booming, is now in sharp decline. High-end car sales have been on a steep downward slope since mid-2024, impacted heavily by political instability and economic challenges.

In addition to economic and political hurdles, social factors are also influencing spending on luxury items, with many hesitant to showcase wealth in a time of heightened scrutiny over income sources.

According to the Bangladesh Road Transport Authority (BRTA), private car registrations have plunged by 36% compared to last year—a staggering decline even before the protests over quota reforms in July and August.

"What people don't realise is that even those who can afford it are reluctant to spend because of the social scrutiny."

Arif Khan, Managing Director of Motors Bay

For luxury car dealerships that have long catered to the elite, this downturn has been a shock. Cars priced over Tk1 crore, often seen as symbols of wealth, now sit untouched in showrooms as sales grind to a near halt.

Political uncertainty and economic pressure are keeping these high-end cars out of reach for their usual buyers—affluent businessmen and prominent figures who are suddenly more cautious about making high-cost purchases.

A market in decline

Bangladesh's luxury car market has traditionally relied on wealthy clients, including those in political circles and high-stakes industries. Yet the country's political instability has shifted buying behaviours. Mohammad Shahidul Islam, secretary-general of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA), describes this steady decline as the result of multiple factors.

"We've reached a point where business has slowed dramatically," Islam told The Business Standard. "Our clients are far more cautious, assessing the political and economic climate before making investments." The hesitation is most notable in the luxury segment, where demand for cars priced over Tk1 crore has dropped to just a fraction of previous levels.

High-end car purchases, once popular among the wealthy, are now perceived as financially risky. Mohammad Bin Sultan Shopan, senior marketing executive at Xoom Auto, echoed Islam's concerns, reporting a near-zero demand for reconditioned cars above Tk1 crore. Cars in the Tk80 lakh to Tk1 crore range that once saw sales of around ten units a month have now dropped to four units in recent months.

It's not just about financial risk; expensive cars attract attention and many now avoid this visibility. "What people don't realise is that even those who can afford it are reluctant to spend because of the social scrutiny," said Khan from Motors Bay, noting that social factors are increasingly influential.

Economic pressures add to the crisis

The already inflated economic atmosphere has further burdened the luxury car market with increased import duties and fluctuating currencies, making these vehicles more costly. The Tk3-4 lakh increase in the price of large-engine cars due to higher import taxes and a weakening Taka has driven potential buyers away from the luxury segment.

"There's a lot of talk about income sources for luxury car purchases, but I'd estimate about 80 percent of our customers are legitimate businesspeople," said Islam. "This decline isn't just about one issue. The dollar crisis and soaring import costs are turning these cars into luxuries beyond the reach of even a select few among the well-off."

The dollar crisis has also made it difficult to secure Letters of Credit (LCs) for imports. Islam explained that LCs are no longer a primary issue as banks are now willing to issue them. However, LC numbers have dropped simply because demand has slowed. The main factor, he added, remains political stability, which directly affects consumer confidence.

Shift to lower-priced models

As luxury cars fall out of favour, buyers are shifting towards more affordable options. Dealers note that showrooms are seeing a comparatively better performance for cars within Tk50 lakh, although sales remain weak. This cost-conscious trend is evident as sales of cars priced between Tk60 lakh and Tk70 lakh have dropped by 50%, while those below Tk50 lakh have fared relatively better. But even in this category, sales have fallen to around 60% of previous levels, according to Shopan.

Dealers are responding by appealing to budget-conscious customers with extended warranties and after-sales service. "We're seeing more inquiries for cars under Tk50 lakh, but interest doesn't always lead to purchases," said Shopan.

Looking ahead

For many in the auto industry, today's crisis is reminiscent of the 2007-2008 period, when political and economic uncertainty during Bangladesh's caretaker government made wealthy buyers hesitant to invest in luxury purchases.

Islam believes that a market recovery may rely on an improved political and economic environment. "This is a temporary setback," he said, hoping that business might bounce back by early next year. "We hope that improvements in the rule of law and political stability will eventually translate to recovery in our sector."

Still, the situation is dire: as luxury car sales plummet, the effects ripple through the entire automotive sector. Although the government's recovery efforts are significant, they haven't been enough to counteract inflation and the weakening Taka, both of which have eroded purchasing power and further dampened demand.

Islam stressed that an upturn in the market would depend on government intervention and a renewed spirit of openness in dialogues with key stakeholders. "An interim government that listens to the concerns of businesses can help ease anxieties and build confidence," he suggested. "To make progress, we need a focus on nation-building, not politics."

With so many overlapping factors negatively affecting Bangladesh's luxury car market, the future is uncertain. However, industry players like Islam remain optimistic that stability will eventually reduce some of the pressure, allowing the luxury car market to thrive once again, hopefully by early next year.