Passenger car sales in Bangladesh fell to a 10-year low last year as prices increased due to appreciation of the US dollar against the local currency and prevailing economic vulnerability across the nation, according to industry people and market data.

As per data of the Bangladesh Road Transport Authority (BRTA), 10,784 private passenger cars were registered in 2023 compared to 16,695 in 2022, illustrating a 35 percent decline.

Industry people said the registration of cars with the BRTA provides an accurate record of sales as there is no scope to hit the road without registering vehicles.

Arif Khan Bipu, managing director of Motors Bay Ltd, an importer and retailer of Japanese reconditioned cars, said the unstable global and local economy alongside an increase in the price of cars due to the appreciation of the US dollar were the major reasons for reduced sales.

According to him, the price of US dollars increased around 26 percent in the past one-and-a-half years while import duty also increased in line with the higher US dollar price.

Consequently, the price of cars increased at least 10 percent last year, putting them out of the reach of most middle-class customers.

Usually, lower-end cars dominate the market as people opt to buy cheaper reconditioned Japanese cars, he added.

However, the present economic situation and persistently high inflation did not present a favourable scenario for mid-income people, who would also have to spend to maintain their vehicles down the line.

Given these circumstances, people who intended to purchase a car changed their minds, Bipu said, adding that it would take more time for sales to revive.

Furthermore, importers cannot bring in cars as per their demand because they have to pay a 100 percent margin to open a letter of credit (LC) while banks are also cautious about opening LCs.

Md Habib Ullah Dawn, president of the Bangladesh Reconditioned Vehicles Importers and Dealers Association (Barvida), said passenger car sales also dropped due to economic instability and political unrest in the country.

According to him, very few people purchased cars over the last six months due to political unrest, including a spate of general strikes and blockades.

Dawn, also managing director of Auto Museum Ltd, said he would sell at least 70 passenger cars per month under normal circumstances, but could only manage average sales of 20 units per month last year.

Dawn stressed that he had not faced such a tough situation in his previous 34 years in the car business.

However, Dawn added that he did not lay off his employees despite the market trending downwards because he was hopeful the situation would improve after the first quarter of this year.

Dawn further said that car imports dropped by around 65 percent due to problems in opening LCs given the high cost of the US dollar.

Echoing the same, Abdul Mannan Chowdhury Khoshru, owner of Nippon Auto Trading and former president of Barvida, said the price of cars has increased significantly.

He explained that when the price of US dollars increases, the import duty is inflated because it is calculated against the price of the car in US dollars.

Underlining why car sales had slowed, Khoshru added that people were reluctant to purchase cars since they were already struggling with inflationary pressure.

According to him, the sales of passenger cars reflected the country's economic situation. If the economy was stable, cars sales would definitely grow, he opined.

Khoshru also alleged that they had to settle LCs at a rate of Tk 120 per US dollar despite opening the LCs at a rate of Tk 111 per greenback.

As there is no scope to bargain with banks regarding the rate of US dollars, he alleged they were capitalising on the situation and making excess profits with regards to opening LCs.

Abdul Haque, managing director of Haq's Bay Automobiles Ltd, also blamed the ongoing economic and forex crises for the drop in car sales.

According to him, people are struggling with inflationary pressures, so they are in no mood to spend on luxuries such as cars.