Reconditioned vehicles running out of stock as traders fail to open LCs
With the current stock, markets will get the supply of the vehicles for about one to two months, sector insiders said
Reconditioned vehicles are running out of stock in the county as traders have been failing to open letters of credit, also known as LCs, to import those for the past four months due mainly to the ongoing dollar crisis amid depleting foreign exchange reserves.
With the current stocks, markets will get the supply of the vehicles for about one to two months, sector insiders said and added that if the situation prolongs, a collapse in the reconditioned vehicle business is inevitable.
"We are already in a supply crisis. If the situation continues, no reconditioned vehicles can be found in the market after two or three months," said Md Habib Ullah Dawn, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association, also known as Barvida.
"The government imposed a 100% LC margin condition on 23 items, including reconditioned vehicles, late last year as part of its austerity measures to save foreign currencies. Although our traders have been willing to continue their imports paying the margin, most banks have failed to supply dollars to us. The crisis of the vehicles has intensified, as a consequence."
"Opening LCs for importing reconditioned cars has been on a drastic decline since October last year. In the current month, it has almost come to a halt," he told The Business Standard, adding that banks are taking advantage of the situation in various ways.
The president said he did not see such a situation earlier in his business career of 32 years. "In the case of the prolonged dollar crisis, our businesses having an investment of Tk20,000 crore and thousands of jobs will be at risk. The country will also suffer to get necessary vehicles at affordable prices."
According to the authorities of Mongla Port that accounts for handling most imported reconditioned vehicles, it received a total of 9,213 units of such vehicles in the first half (July-December) of FY23, which is slightly lower than the corresponding period of the previous fiscal.
The port saw some 21,484 vehicles throughout FY22, while the prime seaport, Chattogram Port, saw 13,975 units.
"But the matter of fact is the arrival of ships. In the previous months, the number of ships carrying reconditioned cars dropped to one-fourth of that of the previous time," said Ahsanur Rahman Arju, chairman of the Barvida Standing Committee on the Mongla Port.
The vehicles came under the LCs opened before the severe dollar crisis, he said, adding that only 1,002 vehicles were awaiting release from the Mongla Port as of Thursday.
"Another ship carrying some 300 to 400 units will come in February. If further LCs cannot be opened, no car will come later on," he told TBS.
Vehicle import through the Mongla Port started in 2009, with 255 cars coming from Japan. Afterwards, it gained popularity for cars due to its fast service. It became the best choice of importers after the Padma bridge inauguration last year.
In FY22, about 52% of the revenue of the port came from duties from the imported vehicles, according to Mongla Custom House Commissioner Mohammad Neazur Rahman. "However, it will not happen this fiscal year for sure as car imports have been on a drastic fall since October last," he told TBS.
For example, we saw 1,289 vehicles in December 2021, which dropped to only 389 in the same month of last year, leading to a 70% fall in the port revenue from the sector, he explained.
"Not only Mongla Port, the prime seaport Chattogram Port also sees the same fate. The government usually earns some Tk5,000 crore in revenue from our imports. Due to the ongoing situation, a large portion of revenue from the sector will go up in smoke," said Barvida President Md Habib Ullah Dawn.
The trade body data says some 6,000-7,000 vehicles used to be under the process of customs clearance at any time in the two seaports, which came down to around 2,000 this time.
General Secretary of the organisation Shahidul Islam told TBS that those who do import-dependent businesses are badly affected. "The Russia-Ukraine war is causing a global economic recession. This is a big shock for small economies like ours. We the car importers are hit hard, as a result. Now we are struggling to run businesses and repay bank loans," he said.
"Vehicles such as microbuses, pickup vans, ambulances and even private cars, particularly reconditioned ones, are not luxury items at all. They are just a necessity, added President Habib Ullah Dawn.
He urged the government to make a special arrangement to allow them to import at least one-third of what they usually import so that markets get a minimum supply of the vehicles.