Heavy Duty Discouraging Car Import

The car market of Bangladesh is dependent on import of reconditioned cars from Japan. This has been the case since the very first car showrooms opened in the country. This, however, might change in the next few years as the economy expands, average income increases, and electric cars come into the play. In these trying times, how will the reconditioned car importers and sellers cope with the challenges? We found out from Mr. Habib Ullah Dawn, ex-President of Bangladesh Reconditioned Vehicles Importers and Dealers Association (BARVIDA).

 

Mr. Dawn, in the very beginning of car business in our country, only a select few could afford them. Now people earn enough to buy cars, but still challenges remain. From your experience, can you talk us through them.

About 25 years ago, the reconditioned car importers and sellers started BARVIDA. Back then it was just 100 people, now there are more than 700 members. Back then, cars were just luxuries. Now its just another need. Just last year we paid taxes to the tune of 3730 crore taka. We pay the highest revenue of any organization. About 85% of all imported cars are reconditioned. Japan’s 95% exported reconditioned cars come to Bangladesh. We bring 5-year-old cars at most, no more than that legally. These cars can still run for at least 10 years without major repairs. People buy these cars because they are reliable. These cars do not depreciate as much as other new cars.

Auto loans are very important. People cannot buy cars easily without it. In other countries, people can buy cars without any down payment. But in our country, before 2011-12 people had to put 30% as down payment, which was reversed in those years. It was when car sells hit a record low. Auto loans are 98% recovery loans – there are no risks for the bank. It was reversed later to 50-50. Maximum loanable amount was just 20 lacs back then, now it has increased to 40 lacs. Duties have increased a lot over the years, which must be taken into consideration. The loan structure should be 70-30 in my opinion, with 30 percent down payment and 70 percent loanable.

Nowadays many are saying public transport is a better choice because buying cars increase traffic on the roads. Still others are convinced, buying a reconditioned car for such huge amounts of money is not a smart investment. How are you dealing with these?

People buy cars because there is no other option. Many people say, personal cars cause traffic. But that is not the case exactly. Abroad, people send their children to school using bus. But school buses are not widely available. So, parents are taking the hassle of buying a car and hiring a chauffeur to take their children to school. Where there would be one bus, now there are 40 cars. Plus, due to traffic, you cannot rely on the car to come back and take you to office, so you buy another car. Car sales remain.

Ridesharing services has increased car sales according to you. But I have seen, existing owners, or people buying used cars are going into ridesharing business. Do you think this has a negative impact on reconditioned car sales?

I think Uber is positive for us. Many people who would never work as a chauffeur, are now doing ridesharing – which creates jobs. We have created at least 24,000 new jobs last year because we imported that number of reconditioned cars. A lot of these cars have gone into Uber ridesharing duty, which means even with a used car market in Bangladesh, we have managed to make profit from Uber and create jobs.

With the way our economy is starting to get bigger, do you think we will always buy reconditioned cars? Should you not be moving on to new car dealerships?

No, I don’t think so. All over the world, there is an option of buying new cars or reconditioned. You can talk about locally manufactured cars in the future, but till date what we have are assembly plants, where pre-made parts are assembled in the country to make cars. Development work under the leadership of our beloved Prime Minister Sheikh Hasina has been moving ahead as fast as a rocket. We are a part of it too. We provide the taxes needed for that. But even then, if anyone wants to manufacture cars here, they must consider exporting, because the local market simply is not big enough to justify a manufacturing plant. For that reason, neither Navana nor others have taken the initiative to set up a factory here. They would rather spend a lot more and import a brand-new car. Hence reconditioned cars will remain.

These days the pollution cars cause is also a topic of discussion. Government is planning on subsidizing new electric car production and sales. When electric cars dominate the market, what will BARVIDA do about it?

Every country in the world is concerned about it. Hybrid cars were first allowed to be imported 6 years ago. These cars are naturally expensive. Electric cars are coming, they are also expensive. Which means the import duties of these cars are also higher than traditional cars. We asked our government to lower duties for hybrid and electric cars. But the duties are still higher here compared to other countries. For traditional cars, it ranges from 123% to 820% of the car’s value. No other country has this. We asked the honorable Finance Minister, who is this 820% duty for? You are not getting any revenue because car imports are discouraged by this. When investors come to this country and try to buy a car, and hear SUVs have 820% duty, they call it insane. I asked the business minister to try and ease the process of importing public transportation. We cannot import a proper bus here, because after taxes, a Japanese bus costs 4 crore taka. If taxes were lowered, we could import reconditioned buses for just 70 lacs taka. Then, we would have proper public transport and people would stop buying personal cars. Then traffic would be lowered on the roads.

If people have the capacity to buying a brand-new car, they won’t prefer a reconditioned car at all. Do you think so? 

Most people who are buying cars are middle class. Even in rich countries, brand new, hybrid, reconditioned car sustains altogether. We think it will take more time to reach that status of the purchase.

Also, you have to understand why people are buying Japanese reconditioned cars. There are two reasons. One is the Japanese reconditioned are trouble-free to maintain, and these cars get well price while reselling. These are the two main reasons for buying a more reconditioned car at an affordable price.

That is why the sale of the reconditioned car is higher than the brand-new car.

Government is planning to subsidize import tax on electric car import. When the price of the electric car will be similar to the reconditioned car, do you think your business will be in a clash?

We don’t think so. As a policy level, we do advocacy to the government. Four years back, we requested the home ministry to open import of reconditioned hybrid cars. They permitted us. You know the price of an electric or hybrid car is higher than the fossil fuel car because of its manufacturing process. It is around 30% to 40% costlier than the fossil fuel car. Not only in Bangladesh, all over the world is promoting electric cars.

Last question. Newcomers to this industry, be it new importers or sellers, or employees of showrooms and importers, how good are they performing? Any advice?

First thing you will need is proper focus. They must be eager to learn. They also must be sincere. You must work your hardest to add value to the company you are working at. It cannot be something you do just for a paycheck. For those who are eager to join our industry as businessmen, to them I say, many young, well educated people are coming to this industry. They are the second generation of automotive businessmen, they know a lot more about cars than we ever did. The older businessmen are struggling to communicate with them. So, please, you must be more knowledgeable than before. Also, you must become a member of BARVIDA as per government policies, without this you cannot open LC to import cars in the future.