Around 63 cars are sold in Bangladesh every day now – the highest in the country’s history – with the number of imported cars having increased threefold since the 2012-13 fiscal year.
“Bangladesh imported around 11,476 cars in the last six months (July 2017- December 2017) to fulfil the growing public demand,” said Habib Ullah Dawn, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida).
According to the Barvida, around 7,353 reconditioned cars were sold in FY2012-13, and 20,149 cars were sold in FY2016-17.
Why are car sales increasing in Bangladesh? Car importers, vendors and banks say there has been a big jump in the purchasing capacity of the middle class as well as an emergence of easier credit facilities.
The lack of standard public transport in Dhaka and the affordable price of cars are also reasons for the boost, according to car importers.
“We are amazed that 11,476 cars were sold in just the last six months,” said Md Habib Ullah Dawn.
“However, if the political situation gets ugly in the wake of the upcoming national elections at the end of this year, sales might fall again,” he added.
Currently, the market size for reconditioned cars is around Tk5,000cr. Each year the size of the market is increasing by 15 to 20%, according to Barvida.
Bank officials say that commercial banks cutting interest rates is one of the reasons why more people are buying cars. In 2014 and 2015, a car loan would cost you 15-16% in interest rates, but that has now dropped to 10-11%.
According to a study done by the Mutual Trust Bank, cars worth Tk1,413cr were sold in the year 2016, almost a quarter higher than 2017. Furthermore, around 14,702 people took loans from the bank in 2016, which is 17.52% higher than the previous year.
“Nine out of ten buyers are using bank loans to get their cars,” said Habib Ullah Dawn, who is also a director at Exim Bank.
“Generally, a bank pays 50% of the car’s price with the condition that the car would be registered under the bank’s name. I think that bank should provide up to 75% now, as around 98% of all car loans are returned on time – something unmatched by any other sector,” he added.
MA Halim Chawdhury, the managing director of Pubali Bank, sees things differently.
“The number of car loan defaulters is decreasing day by day because it is easier to check up on the owner using the car model and the registration certificate. In spite of that, Bangladesh Bank has recently notified us to be stricter regarding consumer loans, so we will be following their instructions regarding all kinds of consumer loans including car loans.
“I think the number of car loans has already started to fall since the beginning of the year in light of the Bangladesh Bank directive,” he said.
Pubali Bank has credited Tk56cr as car loans since last June.
A study by US-based global management consulting firm Boston Consulting Group (BCG) revealed that every year, 2 million Bangladeshis achieve a middle-class economic status.
According to the Bangladesh Bureau of Statistics (BBS), the per capita income rose to $1,610 in November 2017, which was below $500 just a decade ago.