Decline in LC opening
Greater import prices push costs 15-20pc up
ADNAN HOSSAIN BHUIYAN |
August 06, 2022 09:12:40
| Up to date:
August 06, 2022 13:57:17
Reconditioned automobile imports might even see a downturn following the opening of LCs (letters of credit score) has been in decline, due to the federal government’s contractionary measures to avoid wasting foreign-currency reserves.
The opening of LCs to import used automobiles has dropped by one-third within the final two months after a central financial institution measure, say sector insiders.
It imposed a prohibitive 100-per cent money LC margin on luxurious gadgets together with various kinds of automobiles.
Moreover, elevated supplementary responsibility (SD) on luxurious automobiles, Japan’s halt in brand-new automobile manufacturing, increased freight expenses and the Russia-Ukraine warfare have made the automobile market risky, they add.
The Bangladesh Financial institution (BB) additionally instructed different banks to not purchase new automobiles or change outdated ones for officers for not less than one 12 months, reads a latest BB round.
Automotive gross sales have dropped by practically 50 per cent within the circumstances, remark the leaders of the Bangladesh Reconditioned Autos Importers and Sellers Affiliation (BARVIDA).
BARVIDA president Md Habib Ullah Daybreak says the opening of decrease LCs within the final two months implicates that the import of used automobiles will scale back within the subsequent few months.
Referring to the Tk 200-billion house automobile market, he says if the market will get squeezed, it can additionally adversely have an effect on the federal government’s income assortment.
“Automobiles under 2000cc engines should not be thought-about a luxurious merchandise anymore contemplating the nation’s GDP progress and growing buy energy of individuals.”
The sector began recovering from the pandemic-spawned losses since mid-2021, Mr Daybreak says, including: “The vast majority of importers will not have the ability to import automobiles at 100-per cent money LC margin.”
“Though we have agreed to the federal government’s resolution, many banks are dilly-dallying to open LCs which has been growing import prices additional as greenback worth is leaping every day.”
Freight expenses have elevated globally throughout Covid-19 and the continued warfare has added woes to it, observes Mr Daybreak, additionally the proprietor of Auto Museum Ltd.
Given the present scenario, used automobile imports might fall by 30-40 per cent within the coming months, thereby pushing many automobile sellers out of enterprise, he maintains.
On Could 10, the BB imposed a prohibitive 75-per cent money LC margin, up from 25 per cent, on automobiles like SUVs (sports activities utility automobiles), MPVs (multi-purpose automobiles) and sedans.
On July 04, it issued one other notification, abolishing the earlier one, adjusting the LC margin to 100 per cent for such luxurious gadgets.
The regulator has tightened restrictions on luxurious merchandise imports aiming to offset the ballooning import prices and launch mounting strain on foreign exchange reserves.
BARVIDA knowledge exhibits 23,075 automobiles had been imported in fiscal 12 months (FY) 2017-18. The quantity was 12,502 in FY19, 13,258 in FY20, 14,438 in FY21 and 14,077 in FY22.
Within the final 5 years, in keeping with the income board, the federal government has collected round Tk 25.90 billion, Tk 27.42 billion, 26.24 billion, Tk 29.39 billion and Tk 27.43 billion in revenues from automobile imports.
In the meantime, BARVIDA secretary normal Mohammed Shahidul Islam tells the FE that the affect of decrease LCs will begin to be felt from subsequent month.
As a consequence of decrease import trajectory and better import prices, the worth of reconditioned automobiles has already elevated by 15-20 per cent, he says.
Japan additionally stops making new automobiles for the worldwide recession, mounting the demand for used automobiles there and making it costlier for Bangladeshi importers to supply Japanese automobiles, he argues.
Mr Islam, who owns HNS Cars, says Japan is the supply of 95 per cent of the reconditioned automobiles imported to Bangladesh.
Gross sales of reconditioned automobiles at house dropped by practically 50 per cent amid financial uncertainty amongst prospects, ignited by mounting inflation because of the worldwide financial meltdown.
In response to Mr Islam, Bangladesh has an annual demand for an estimated 20,000 cars-70 per cent are reconditioned and the remaining are new.
Moreover, the finances for FY23 has elevated SD on motor automobiles, thus resulting in a rise in automobile costs.
The responsibility has been raised to 250 per cent from 200 per cent for automobiles having 2001-3000cc engines.
It has been set 500 per cent from 350 per cent for automobiles with 3001-4000cc engines.
Nonetheless, the responsibility on automobiles with greater than 4000cc engines stays the identical at 500 per cent.